Nick Clegg has fuelled speculation that he is positioning for coalition with Labour next year by saying he believes Ed Miliband's party has "changed".
The Deputy Prime Minister also criticised the Tories for lurching to the right, accusing his current partners in government of becoming "much more ideological" since 2010.
The comments, in a BBC Radio 4 documentary, follow an apparent thaw in relations with shadow chancellor Ed Balls. The animosity between the men had been seen as an obstacle to the two parties joining up if there is a hung parliament after next May's general election.
Asked about Labour, Mr Clegg said: "I think they've changed. I think there's nothing like the prospect of reality in an election to get politicians to think again and the Labour Party, which is a party unused to sharing power with others is realising that it might have to."
He said if there was such a pact, the Liberal Democrats would try to stop Labour spending too much. "There is just no doubt in my mind that if there were a Labour-LibDem coalition, we the LibDems would absolutely insist that government would not break the bank," he added.
Amid signs of tensions with David Cameron's party, Mr Clegg said: "I think the Conservative Party has changed quite dramatically since we entered into coalition with them. They've become much more ideological, they've returned much more to a lot of their familiar theme tunes."
l The second part of Nick Clegg - the Liberal Who Came to Power is on BBC Radio 4 tonight at 8pm
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