Nick Clegg is to take personal charge of a massive programme of constitutional renewal, including a referendum bill on electoral reform passed by summer 2011, in what the prime minister, David Cameron, described yesterday as a Liberal-Conservative government that marks a "historic and seismic shift" in British politics.
Cameron will chair his first full cabinet meeting this morning before putting the finishing touches to the coalition government with the announcement of junior ministerial positions, which will include a number of Lib Dems.
The new leadership was unveiled yesterday on yet another breathless day at Westminster, when Cameron and his deputy prime minister Clegg held a joint press conference in which both displayed equal enthusiasm for turning their shotgun marriage brought about by a hung parliament, into a genuine partnership.
Cameron said the government would end the chronic short-termism in British politics.
Clegg said: "Until today we were rivals, and now we are colleagues. And that says a lot about the new politics which is now beginning to unfold. This is a new government and a new kind of government."
They also published a joint memorandum negotiated over the last five days covering deficit reduction, environment, tax, banking reform, an annual cap on immigration, welfare and relations with Europe. A more detailed document will be published in a fortnight, as well as protocols on how the parties will retain their independence.
On some issues, the two parties have fudged differences by setting up reviews, independent commissions or agreeing that the Lib Dems will be free to abstain – a decision that will ensure that measures such as new nuclear power stations can be built without Clegg's party endorsing them. There may also be difficulties ahead over electoral reform, with the Tories insisting that the number of MPs is reduced and the size of constituencies equalised – a move that could give the party an advantage at election time.
Questions were also raised last night on the safety of the Lib-Dem-Tory plan that would require any vote to dissolve parliament to be passed by 55% of all MPs. One legal expert described such a move as "dangerous".
On the central economic issues, the Conservatives have secured their red-line commitment to cut £6bn from public spending this year, as well as a greater emphasis on deficit reduction through spending cuts, as opposed to tax rises. Liberal Democrats have also watered down their plans for a redistributive tax switch, turning it more into a tax cut for middle-income earners. Previously the expensive reform was to be funded by a redistributive mansion tax and a tax on pensions allowances for higher earners, but these have been dropped.
The details of the policy agreement came to light as Cameron appointed his first full cabinet, which includes five Liberal Democrats and four women – including the first female Muslim member of the cabinet.
Among the eye-catching appointments were David Laws, a close Clegg ally, who has been appointed Treasury chief secretary. He will have responsibility for a painful emergency budget in 50 days, as well as an autumn spending review that will see the savage cuts Clegg predicted taking place over the next three years.
George Osborne, the youngest chancellor in more than 180 years, told civil servants they were to treat Laws and himself as members of one government.
Vince Cable, the business secretary, is surprisingly not being given responsibility for banking reform, but will sit on a joint committee. The other two Liberal Democrats given seats at cabinet are Chris Huhne, as energy and climate change secretary and Danny Alexander as Scotland secretary.
In the first sign of tensions between the two parties, the Conservatives had to countermand a Liberal Democrat briefing that Cameron would not be responsible for the dismissal of Lib Dem members of the new administration.
Nine previous members of the 32-strong shadow cabinet have not made it to the new cabinet. William Hague, appointed foreign secretary, is to travel to Washington on Friday to discuss Afghanistan.
The most senior female appointment is Theresa May as home secretary. May famously described the Tory party as the "nasty party", and she will have to work closely with Ken Clarke who has been appointed lord chancellor and justice secretary.
The former shadow home secretary, Chris Grayling, has been demoted to a ministerial post in the work and pensions department under Iain Duncan Smith, a man likely to advance radical welfare reforms, including making benefits more conditional on working. Duncan Smith is a strong advocate of recognising marriage in the tax system.
In one of the least noticed changes, Clegg has been given responsibility for political reform including a bill enabling a referendum on the alternative vote for electing the Commons. Liberal Democrats said the referendum is intended to take place in time to be implemented at the next election.
Clegg's high-risk strategy will face its first test at a special party conference in Birmingham, but his audacious move is likely to receive a full endorsement.
Clegg will also face difficulties in handling a byelection in Thirsk and Malton where the Liberal Democrat candidate, Howard Keal, refused to tame his anti-Tory rhetoric saying: "It's a full-on fight, I hope disgruntled Conservatives – of which there are plenty – will lend me their vote and Labour supporters will vote tactically to help deliver a shock result.
A spokesman for Jack Straw said of the move on confidence votes: "For all the phoney talk about a 'new politics' this proposal is simply about crudely seeking to fix the electoral system to suit partisan interests. It is profoundly anti-democratic."