91Èȱ¬

When rapid and decisive change happens it's hard for the human brain to keep up. We have a natural tendency to try and fit reality to our existing ideas - and that's what characterises much of the commentary this morning. But big things did happen between lunchtime and closing time yesterday. Here's my provisional take:

1. David Cameron has accelerated - but not completed - the transformation of the Conservatives into a socially liberal centre right party. He has taken a conscious decision to use the hung parliament to do this, bolstering his social-liberal wing at the expense of the traditional right, and finding an agenda to satisfy, for now the "new" right of the Tory party in the Cornerstone group.

2. Nick Clegg has secured significant compromises that allow, on paper, the Libdems to claim they are not simply "propping up a Tory government" but influencing and shaping not only policy but the whole way Britain is governed. If we get a Liberal 91Èȱ¬ Secretary and/or an essentially social-democratic (for that is really what Vince is) Banking & Business Secretary then in these two departments - where diktat and crisis management are more important than legislation - will define what the Libdems contribute to the "Clameron" administration.

3. These compromises and rapid moves will be put to the test and could still unravel as the "tribal" aspect of party politics kicks in: the Tory right will want to do some symbolic things that mark their territory, on defence, Europe, possibly industrial relations, and certainly in terms of spending cuts. The left wing of the Libdem mass base stands in danger of bleeding away to Labour and the Greens, which will place pressure on Clegg.

4. The coalition arrangement itself is untested in the modern political context. Under Thatcher, Blair and Brown the machinery of state was wielded ruthlessly: can a coalition really do that, and does it want to? Or will we begin to see public disagreement between ministers; the end of the "party line" government fixers have sometimes tried to enforce in business, science, the professions and the arts?

5. The so-called "progressive moment" advocated by Alex Salmond, parts of the Libdems and the Guardian newspaper has been missed. It's very clear to me, from numerous contacts, that Labour had no appetite to make a coalition with the Libdems happen. The left saw it as a power-grab by a largely unelected rump (Mandelson, Adonis, Campbell); the Scottish Labour Party explicitly rejected "national interest" arguments in favour of party interest. Many English backbenchers could feel the wrath of the tabloids rising and didn't fancy facing both that and the market backlash with a parliamentary minority. Instead a widespread defeatism gripped the ranks of former ministers (there are lots of them); and it dawned on the party's young generation that in a Cling-On coalition they would have no chance to debate what went wrong and renew the party's policy agenda.

6. In the background, the theme tune to this coalition was being sung by Tory negotiator Oliver Letwin and Cameron guru Philip Blond: the small-state, big society agenda summarised in Blond's book Red Tory was pushed relentlessly as the ideological glue that could hold the Liberals, Cameronites and Cornerstone Christians of the Tory right together. We'll see.

7. For now the first big tests are economic. George Osborne gets his £6bn cuts, the Treasury and the emergency budget. But does he get to emerge from an imminent review of the public finances with his claim that they are "fiction" vindicated? And does the new coalition convince the ratings agencies that Britain's deficit reduction plan is serious enough to avoid a downgrade?

8. Finally the media will never be the same again. All the instincts of the Tory red-tops are to dislike Clegg, dislike coalition. Plus the Telegraph and Mail even thought Cameron was a namby-pamby, never mind Clegg. Only the Times can lay claim to any kind of intellectual affinity with what's been created, together with - if they can only admit it to themselves - the Guardian. The Indy (and Observer if it maintains its editorial independence) can claim to have fought for the Lib-Lab coalition, but now that's impossible it will be interesting to see if the Indy moves left. The raison d'etre of the Mirror's slavish pro-Gordon line is now gone so it may be able to reposition itself.

And I leave you with the following observation.

I was born in 1960. Between the ages of 10 and 20 I saw four elections and three changes of government, a hung parliament and an informal coalition.

In the 30 years since then I have seen just two changes of government: in May 1997 and last night.

Both the arrival of Thatcher and that of Tony Blair were triumphalist. They seemed to presage long eras of one-party rule in which the checks and balances on the executive would be eroded. Last night did not - but let's see what happens.

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I'm about to head off to the Bank of England, where Mervyn King must now adapt to the conundrum: what does monetary policy do when fiscal policy is suddenly tightened; and how does an institution with the feel of an 18th Century opera house (the doormen still wear livery) suddenly become both micro and macro regulator of a 21st Century financial centre.