Gordon Brown made an unprecedented overture to the Liberal Democrats yesterday amid growing expectation that Nick Clegg's party could hold the balance of power after the general election.
As Mr Brown hinted he would go to the country on 6 May, Labour and the Conservatives clashed on the best route out of the recession, the issue bound to dominate the campaign.
The Prime Minister was accused of dishonesty after he refused to say where public spending would have to be cut to tackle the nation's debts.
The parties begin to set out their election stalls this week, with Labour promising to improve literacy in primary schools and the Conservatives pledging to raise hospital standards.
A slight fall in the Tory opinion poll lead in recent months has made the election the most unpredictable since 1992.
Asked about the possibility of a coalition with the Liberal Democrats in the event of a hung parliament, Mr Brown struck an uncharacteristically emollient note towards the party.
“There is an agreement of ideas and of course the Liberals, I think, are closer to us on tax and public services,” he told BBC1's Andrew Marr Show.
Labour would fight “every inch of the way” at the election, he said. But Labour commitments on electoral reform, overhauling the House of Lords and recalling MPs who committed fraud, as well as its approach to the environment and civil liberties, showed his party had “not dissimilar” policies from the Liberal Democrats.
The apparent olive branches came after Mr Cameron also tried to woo the Lib Dems by insisting there was “a lot less disagreement than there used to be” between their party and the Tories.