NICK Clegg will today urge Liberal Democrats to reject their past status as the third party of opposition and embrace a future as a firm party of government as he makes clear the election manifesto will spell out the red lines for any Coalition negotiations.

The Deputy Prime Minister will tell his party's annual local government conference the LibDems face a fork in the road, facing very real consequences depending on which way they turn.

"One way embraces the future, where the Liberal Democrats seek to become a firm party of government, striving to govern at every level to make Britain a better place.

"The other clings to our past, limiting our ambitions and our prospects, consigning ourselves to be the third party forever, turning away from the millions of people we have promised to serve."

With his party losing its previous mantle as the protest party and wallowing in the polls, hovering around 10%, Mr Clegg will warn at the event in Manchester: "The truth is this: the Liberal Democrats can do more good in a single day in local and national government than in an eternity in opposition."

He will say that to become a "fully-fledged party of government" will take discipline, commitment and leadership, but he will also admit that being in the Coalition has come at a cost.

"We have taken a hit," Mr Clegg will declare, but he will also warn that if the Lib Dems "hanker for the comfort blanket of national opposition", then they will consign themselves to irrelevance, impotence and slow decline. The party leader will recognise it was right that the party's last manifesto highlighted four key priorities – raising the income tax threshold, the pupil premium, economic rebalancing and political reform.

But he will also acknowledge the lingering damage of the Lib Dems' broken promise on tuition fees, declaring it was a "mistake I will not repeat".

He will insist that the next party manifesto will be "practical, responsible and deliverable"; it will be a "to-do list not a flight of fancy".

Mr Clegg will explain: "As a party with compassionate instincts, the desire to offer big spending commitments will be as strong as it has ever been... but we will resist the temptation to talk big and end up delivering small."

Ahead of the speech, a senior aide to the party leader said the manifesto would clearly set out the commitments the Lib Dems would "die in a ditch" for in any power-sharing deal.