The Liberal Democrats have long been a few inches to the left of New Labour. Or to perhaps express the matter more exactly, New Labour has long been a few inches to the right of the Lib Dems.

These differences are largely nuances, of course. There are no disagreements of substance sufficient to rule out a coalition government in the event of a hung parliament.

But such contrasts as there are work without exception in the Lib Dems’ favour. They are more egalitarian and redistribution on taxation and student financial support, more libertarian on asylum policy, more consistently bourgeois democratic on electoral reform and the House of Lords and more pacifist on Iraq.

As a result, they have won a degree of support among people who should rightly constitue the natural base for the democratic socialist party Britain so conspicuously doesn’t have right now.

I remember watching the 2005 general election results come in on television at a gathering of utterly stereotypical North London middle-class media types, theatre directors and quangocrats. As the effects of the copious Rioja and the homegrown took hold, people rather shyly confessed how they had voted.

All seven of us had backed Labour in 1997. This time round, only four had done so, all with greater or lesser reservations. Two had gone for the Lib Dems and one for Respect, largely on anti-war grounds. Yet there was no reason that all of us could not have supported the same pluralist left of centre party.

As readers not obsessed with the current round of SWP expulsions will have noticed, the attentions of the mainstream political world are currently centred on the resignation of Ming Campbell, leaving the Lib Dem top job open for the second time this parliament.

The two leading contenders are Chris Clegg and Nick Huhne. Sorry, I meant to type Nick Clegg and Chris Huhne. Easy mistake to make, I’m afraid.

After all, both are middle-aged middle-class white blokes who went to the same public school, spent time in Brussels as euro-MPs before entering parliament in 2005, and are leading members of the Lib Dems’ Orange Book neoliberal faction.

Correct me if I’m wrong, but I am unaware of any statement ever to proceed from the mouths of either of these two guys that places them even marginally outside the centre-right Bameronite space in which the government and opposition parties respectively stand as bookends.

The meaningful choices for British voters are just about to shrink that little bit further.

The so-called centre ground is the most overcrowded stretch of real estate in British politics. It is – as I’ve argued before – in truth really the centre-right, and must rank somewhere about seven or eight on a scale from democratic socialism to Thatcherite Conservatism, but let that pass.

With both New Labour and the Tories firmly entrenched in this location, it cannot be easy to develop a distinctive brand of centrist politics. After all, some differences just are just too small to split.

Yet that’s the challenge facing (yet another) new Liberal Democrat leader. Nick Clegg - pictured - has this afternoon narrowly secured the job from the older but otherwise identikit Chris Huhne.

Back in the 1980s, the party of Keynes and Beveridge might have offered a suitable home for vaguely progressive types who thought that the unions had too much influence on Labour Party structures, while its Manchester School tradition might have appealed to free marketers repelled by Thatcherite authoritarian populism.

But a quarter of a century later, it is hard to know just what the Lib Dems are for. Clegg – who started in politics working for a Tory politician, and is usually considered a rightwinger on economic issues – has pledged to form a ‘liberal alternative’. But what would that look like?

Consider the strategy of one of his recent predecessors. Charles Kennedy at times seem to flirt with the idea of taking his party to the left of New Labour.

Political positioning is entirely relative, of course. But Kennedy could easily and coherently built on initial opposition to the Iraq War, stuck by the 50% tax call for six-figure incomes, and maybe made a few friendly noises to the unions.

Clearly he calculated that it was not in his best interests to go there, probably because the Lib Dems have more votes to gain from disillusioned Tories than from disillusioned Labour supporters. And so – the use a Cameronism – he bottled the choice.

But surely there is space in Britain today for a liberal party that is, like, so actually liberal. If not, they might as well pack up and go home.

Sometimes it seems like we are running out of civil liberties for New Labour to crack down on. Since 1997, it has in effect torn up the Geneva Convention on refugees, and clearly disdains the substance and spirit of the European Convention on Human Rights. Instead, the agenda is one of house arrest, arbitrary and punitive deportation, and shoot to kill policies.

Jack Straw famously inveighed against ‘Hampstead liberal lawyers’. Charles Clarke remarked: ‘I am neither woolly or a liberal or a woolly liberal.’ John Reid didn’t even have to both with the rhetoric; no-one who gave the matter any thought ever accused him of closet L-word tendencies.

But for the new leader of the Liberal Democrat party, accusations of liberalism should not prove too damning. Clegg could do a lot worse than picking up the civil libertarian ball and running with it, if only for the sake of a bit of product differentiation.

The Lib Dems have gotten bored of outflanking Labour from the left and have decided to outflank the Tories from the right instead. Well, that’s the interpretation some commentators are putting on the news that Nick Clegg – pictured - has switched his party’s fiscal policy to a reduce public expenditure/cut taxation platform, at any rate.

Clegg wants to cut government outlays by £20bn, equivalent to 3% of the total. He is noticeably less clear about where the axe is going to fall.

New Labour’s ludicrous ID card scheme will be scrapped – and amen to that – but that money is already earmarked to boost the Old Bill’s coffers. The number of MPs will be reduced by 150, and some defence projects could get cancelled. Watch this space.

The universal assumption is that this act of repositioning has to be popular, especially as the Tories have pledged to stick to Labour spending plans if they win the next election and restrict any tax cuts to ‘sharing the proceeds of growth’. Tory rightwinger Iain Dale – writing in the Daily Telegraph today – is palpably beside himself that another party is doing what he thinks his party should be doing.

But is promising tax cuts really an instant route to extra votes? Well, yes and no. Clearly there is a large slice of the electorate that will find Clegg’s stance attractive, especially as most of us are finding the going tough right now.

On the other hand, people are realistic enough to know that if society wants the things that tax revenues buy, tax revenues need to be raised to pay for them. The debate boils down to how the money gets spent.

From a leftwing viewpoint, it is morally objectionable to make pensioners pay VAT on fuel to fund nuclear weapons. But clawing back some of tax breaks doled out to the super-rich under successive governments since 1979 to fund public services is surely the right thing way to go.

In the current ideological climate, this is not an easy case to sell. Britain has yet to see through the Thatcherite lie that public investment is by definition squandering money. The fact that Sweden and France have superior socialised medical systems, for instance, is regarded as somehow unrelated to those countries’s higher levels of state spending.

Rightwing newspapers often campaign for such things as higher pay for nurses, but against the tax rises that alone could fund them. The CBI moans about taxation ‘burdens’ on business, then in the next breath calls for better road and rail infrastructure and more taxpayer cash for education and training. And it’s funny how the bosses stay strangely silent when anyone suggests that tax credits amount to a massive state subsidy for low pay.

It is not as if the City elite live on another planet. It is not on for a small number of plutocrats to pay little or nothing to the public purse, while benefiting from what it pays for in 101 ways.

Even if they do use private hospitals and independent schools, who do they think foots the bill for the roads their chauffeurs drive them along and the streetlights outside their offices, or the courts that hear their litigation claims, to give just a handful of examples?

Given that the way in which the decades of neoliberalism have seen society reconstructed around the needs of capital, what excuse can those at the top evince not to properly contribute to the arrangements that enable them to accumulate and hold their wealth?

Nor is Clegg’s cut-price 1980s Tory Boy routine going to play well with the entire Lib Dem voter base, which includes a layer of middle class people who actually think they should be paying more tax and not less, if only out of guilt.

I recall spending the night of the 2005 general election watching the results come in on television with a small group of friends, almost all of whom had been strong Labour supporters in the Thatcher and Major years.

During that evening’s Rioja and spliff-fuelled political discussions, it emerged that the North London middle-aged bien pensant demographic is irrevocably split. One person had voted Respect, another Green. But four had backed the Liberal Democrats, citing opposition to the Iraq war and the 50p in the pound tax plan for higher earners among their reasons.

OK, the gathering hardly represented a cross-section of the general public. But those assembled do make up an identifiable social layer, of a size presumably big enough in relative terms to be factored in to Lib Dem calculations.

Being self-consciously hip North Londoners - Britain's most derided demographic after chavs - these people do not wear beards and sandals. But the mentality is pretty much the same. The moral is that you can indeed win friends and tax people, and the Lib Dems may be making a mistake if they stop trying.

Your starter for ten: quote soundbites from three memorable Liberal conference speeches. You may choose from any period in the long and distinguished history of the once great party of Lloyd George, Keynes and Beveridge. Toughie, right? Even hardened political obsessives will probably be stumped.

The one quote that instantly does spring to mind is David Steel’s ‘go back to your constituencies and prepare for power’ outburst from 1981, which rightly became one of the most ridiculed perorations of the period. For years afterwards, mocking reference to those words was obligatory when taking the piss out of Liberal activists.

So Nick Clegg - pictured - really was tempting fate yesterday when he offered delegates in Bournemouth yesterday a similar observation, in the form of ‘I can tell you where we are headed: government’.

Reality check, Nick; to be in with a shout at office, you need an opinion poll showing about ten percentage points higher than the number of women you claim to have bedded. The Lib Dems are a long way short of that.

Indeed, the latest findings from Ipsos MORI puts Britain’s third party down four percentage points to 12%, at least among those certain to vote. That puts the rough ratio between electoral support and notches on Clegg’s bedpost at just 0.4, which isn’t going to get them very far. Moreover, analysis from the pollsters themselves suggests that the Lib Dem core vote is softening and may be switching to the Tories.

Clegg’s answer was to blast ‘Andrex puppy’ Cameron as vacuous, and then complete the shift of the Lib Dems from arguably the furthest left of the three mainstream parties to arguably the furthest right. The party’s supposedly radical grassroots offered no reported resistance.

OK, so he tried to cover his tracks with a direct appeal to Labour voters via a token nod to ‘social justice’, in the hope of propping up such inroads as the party has achieved among the north London middle class demographic. But with the Cameroons these days offering us all the SJ you can eat for a fiver, this won’t really work, even at the level of product differentiation.

Essentially, the Lib Dems remain what they have always been; a third rate third party that has achieved a modicum of support by saying whatever they think the public wants to hear, be it dog whistle local level racism or opposition to the war in Iraq.

With the rise of other forces as the potential repository for protest votes, I suspect their future is not as bright as that bloody irritating shade of yellow they insist on using in their logo.