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UK remains in limbo as parties fail to seal a deal

Britain was still a nation in limbo today as Lib Dem leader Nick Clegg made his Tory counterpart David Cameron sweat on a deal to run the country.

As talks continued today, the pair were edging towards a deal that would put the Conservative leader in Downing Street.

Their negotiating teams spent nearly six hours at the Cabinet Office yesterday, trying to thrash out an agreement, but Liberal Democrat sources suggested that it might be Thursday before Mr Cameron could think about walking into No 10.

William Hague, who led the talks for the Tories, and Danny Alexander, his Lib Dem counterpart, tried to reassure the money markets by announcing that cutting the UK's deficit would be at the heart of any agreed programme for government.

Tory sources suggested that a deal -- short of full coalition but with agreement on a range of legislation -- was within reach today. Liberal Democrats, however, described this as "optimistic". A senior source said: "It's more important to get this right than to be hasty."

Yesterday afternoon Mr Clegg increased the pressure on Mr Cameron by sitting down for 70 minutes in the Foreign Office with Labour leader Gordon Brown. The Prime Minister, who had said previously that his rivals should take as much time as they needed to try to find agreement, offered the Lib Dems a full referendum on proportional representation. He reminded Mr Clegg that the overlap between their parties was much greater than that between the Lib Dems and the Tories.

But Mr Clegg did not appear to bite. Later he sat down with Mr Cameron on "neutral territory" in Portcullis House, the MPs' office block, for their first face-to-face talks of the day.


Both leaders came under pressure from party members over voting reform, the key Lib Dem issue. Senior Tories warned Mr Cameron to steer clear of it or risk a mutiny. Lib Dems warned Mr Clegg that he would break the party if he helped the Tory leader into power.

Mr Cameron spent much of the afternoon holding an "open office" to try to calm fears over what he might give away in negotiations. He will address his MPs today.

Mr Brown returned from Scotland to Downing Street amid growing expectation that he would resign as Labour leader later this week. Lord Turnbull, the former Cabinet Secretary, said that Mr Brown was correct to remain in No 10.

"Not only is he entirely within his rights, that is exactly what we would expect him to do," he said.

Ministers will return to their departments today, although by convention they remain in limbo and will avoid contentious decisions. One Cabinet minister said that he had asked his civil servants what work there would be to do.

"They haven't given me a very clear answer," he revealed.