Labour to go it alone in Wales as talks in Scotland flounder

With the new era of consensual politics in Britain only a few days old, talks between Labour and the Liberal Democrats to form…

With the new era of consensual politics in Britain only a few days old, talks between Labour and the Liberal Democrats to form a power-sharing government in Scotland failed to produce agreement last night, while in Wales Labour decided to "go it alone" and form a minority administration.

Hopes of reaching a deal, hinged on student fees in Scotland and difficulties over PR, receded despite the intention of the First Minister-designate, Mr Donald Dewar, to resolve the issue before the parliament meets for the first time in Edinburgh tomorrow.

After a day locked in talks with civil servants and intense bilateral negotiations, a joint statement from the parties revealed little detail beyond a willingness to engage in serious discussion, and it appeared nothing of substance had been agreed. Ahead of his meeting with the Liberal Democrats leader in Scotland, Mr Jim Wallace, Mr Dewar was hinting at "very real difficulties" but not ruling out the establishment of a Scottish cabinet on Thursday.

Despite the slow progress - the Liberal Democrats are holding fast to their election pledge to abolish student fees and the extension of PR to local elections - a compromise being mooted is an increase in the number of students exempt from paying tuition fees.

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After a second day of talks, Labour and the Liberal Democrats were examining a joint protocol document setting out the main principles of their party manifestos and considering a separate document outlining areas of agreement. One Liberal Democrats negotiator gave an assurance that politicians were talking tough: "You can take it for granted that nobody is twiddling their thumbs."

In Wales, with Labour securing 28 seats in the National Assembly, three short of a majority, Mr Michael, the First Secretary-designate, confirmed he was not looking for a "quick fix" arrangement and had turned down the offer of forming a coalition with the Liberal Democrats.