Cameron and Clegg plan new coalition

David Cameron and Nick Clegg are preparing for talks on a new Conservative/Liberal Democrat coalition within hours of Thursday's general election, if the Tories win the most seats in a hung parliament.

With polls still putting the Tories and Labour neck-and-neck, Ed Miliband is also within touching distance of power with the support of the Scottish National party. The impasse has forced Mr Cameron to draw up plans to try to stay in office short of outright victory.

The latest FT seat projection, compiled by electionforecast.co.uk, gives the Conservatives 274, Labour 270, SNP 54 and Liberal Democrats 26, as the tightest election in a generation enters its final leg.

Mr Cameron's allies say they expect him to "move quickly" on Friday to try to seize the initiative if the Tories emerged as the biggest party on May 8, while Mr Clegg said on Sunday he would initially talk exclusively to the party leader with the biggest mandate.

With neither Labour nor Tories expected to win an outright majority, Mr Cameron's allies say the prime minister would claim victory and assert his right to govern.

In 2010, Mr Cameron offered a coalition deal to the Lib Dems within 24 hours of the election and senior figures in both parties expect similar talks to begin quickly this time, if the two parties believe they could form a stable government.

The prime minister's allies say that - unlike last time - Mr Cameron would involve executive members of the backbench Tory 1922 committee in any coalition talks from the outset. Mr Clegg would also need party backing for any deal.

Mr Cameron told the BBC that delivering his promised EU referendum was a bottom line in any talks: "I will not lead a government that doesn't have that referendum in law and carried out."

But that would not be a deal breaker: Mr Clegg made it clear on Sunday that an EU vote was not one of his party's red lines. He said the Lib Dems would insist on more education and health spending, "fairer" deficit reduction, tax cuts for low earners and environmental protection as their price for a deal.

The Conservative party declined to discuss scenarios in a hung parliament. However, senior Tories privately talk of the party winning 295-300 seats on Thursday, well short of the 325 target for an overall majority.

In that case Mr Cameron's allies say he would remain as prime minister and bring forward a Queen's Speech - banking on the support of the Lib Dems and other smaller parties.

Mr Cameron's closest allies say the prime minister would try to push through such a Queen's Speech even if the combined total of Labour and SNP MPs could defeat it. "He would challenge Labour and SNP to bring down the government in plain sight and make it clear that they had the bloody dagger in their hands," said one.

Mr Miliband says he would do no deal with the SNP in a hung parliament and plans to bring forward his own Queen's Speech, with the expectation that the Scottish nationalists would support it. Nicola Sturgeon, the SNP leader, has said she would "lock David Cameron out of Downing Street".

The Labour leader on Sunday vowed to keep his election pledges, promising not to contest the 2020 election if he failed to keep them.

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