There had been rumors all morning that the two parties were close to a deal deal but Gordon Brown's resignation as Labour leader - and intent to resign as soon as constitutionally possible as prime minister - may have changed everything. Tim Montgomerie's reading of events from earlier today:
Some members of Team Cameron wanted a formal coalition - 'the change coalition' as it has been described by Guido Fawkes and Iain Dale. That is unlikely. Too many Liberal Democrats regard a formal coalition as electoral suicide. It would see them lose all prospect of victory in Lib/Lab marginal seats. The only way they could be persuaded into a coalition was a very strong commitment on proportional representation. Team Cameron has toyed with the idea of offering a PR referendum for the Commons and PR for the Lords but they are aware that the party in the Commons, Lords and in the country would be very unhappy with any such concessions.
Aides to David Cameron are nonetheless pleased with the negotiations. The conversations between Cameron and Clegg have been "warm". Britain is likely to have a second election within a year but the good personal relations between senior Conservatives and Liberal Democrats and a range of concessions (including some cross-party working groups) should be enough to give Britain a stable government in the forthcoming months.
Guido is less sanguine:
LibDemVoice has just released a poll of LibDem members 80% say that without significant progress on electoral reform the deal is off. So that is one part of the triple-lock that the key may not be in in. The Federal Executive is the other part of the lock some 35 strong, which means that if 9 liberal-lefties or PR purists say nay, it will have less than 75% support and the deal is off.
Massie's contribution:
It's not unreasonable for Clegg to think of his party's future electoral fortunes, even at a time like this. But he may be damned if he does and damned anyway if he doesn't. A formal arrangement, complete with seats in the cabinet and a Programme for Government, ties him to the fortunes of a government that is going to have to make many unpopular decisions. In return, of course, he can advance liberal aims across a range of government departments and this is no small bauble. No Liberal leader in decades has had such an opportunity.
But clearly such an arrangement means he is likely to stand or fall with Cameron. Their fates will be bound together and it's not impossible to see how, some years down the line, this could - only could mind - lead to a slow but irrevocable split in his party as the left drifts off to Labour and the right is slowly absorbed by the Conservatives. This could happen even if, at some point, the Liberal Democrats achieve their much-cherished voting reform. Greater love hath no man than that he lay down his party for his country and a seat at the top table.