Jonathan Reed: Nick Clegg must knit together party faithful for bumpy ride that lies ahead

But the picture is unlikely to be repeated this year as party

activists fast discover the price of being in power – not least the heightened security that will see knitting needles confiscated at

the door.

And that is not the only difference.

Even those of a yellow disposition with the rosiest tint in their

spectacles would have struggled to anticipate 12 months ago that they would be meeting again in Liverpool this weekend with their leader Nick Clegg ensconced as Deputy Prime Minister.

Over the next five days, four Liberal Democrats will speak as fully fledged members of the Cabinet authorised to make Government policy announcements – a far cry from previous conferences where the main talking points centred around motions to legalise cannabis or ban goldfish from being given away as fairground prizes.

A string of other MPs will speak as fully-fledged Government Ministers. And turnout is up by more than 40 per cent on previous years – with more than 6,500 passes handed out at the last count – as media, lobbyists and major companies suddenly realise that this is a conference which now matters, and can no longer be classed as a late summer holiday.

In the spirit of coalition co-operation, several senior Tories – Housing Minister Grant Shapps and Cabinet Office Ministers Francis Maude and Oliver Letwin – will speak at fringe meetings, something rarely seen by MPs from other parties.

Senior Lib Dems are keen for this to be a conference of celebration in recognition that the party is sampling its first taste of power for 65 years.

They stress key "wins" for the party so far, such as raising the income tax threshold by 1,000, the official abolition of identity cards, Parliamentary bills to pave the way for a referendum on voting reform, the introduction of fixed-term Parliaments and the prospect of a pupil premium to direct education spending towards youngsters from the poorest backgrounds.

In many respects, the coalition is working well – far better than many expected. Inside Number Ten, there is a genuine affinity among many of the Tory and Lib Dem advisers who have found they get on incredibly well. Fears that the two sides would man rival operations have not materialised.

And inside many Whitehall departments there is a determination to make it work – and even surprise among Ministers and aides at how easily they can function together.

Lib Dems point to the aforementioned Shapps andForeign Secretary William Hague as two one-time rivals who truly grasp the political dimension of the coalition – the need for the smaller party to have something to sell to its grassroots.

In contrast, Defence Secretary Liam Fox is seen as a member of the awkward squad, although the consolation for the Lib Dems is

that the Treasury and Downing Street have quickly come to the same conclusion.

There is plenty of genuine optimism ahead of conference, but there are signs of tension too. Just as the Tory right has its angst over the future of Trident and voting reform, coalition plans for housing benefit cuts, possible changes to council housing tenancies and a radical overhaul of the NHS are all causing unease, or even dismay, on the Lib Dem left.

This week, the party's grassroots needs to decide whether its heart is really in the coalition.

Members overwhelmingly backed it when it was first set up, and a Populus poll this week revealed 84 per cent of Lib Dems think the Cameron-Clegg axis is going well.

But the same poll also revealed only 29 per cent of party supporters think the coalition is handling spending cuts – the defining issue of this Parliament – effectively.

With barely 10 per cent of seats in the House of Commons, the party has to be realistic about how much of its agenda it can achieve.

Mr Clegg made clear earlier this week that benefits will be cut, and he tells the Yorkshire Post today that the Government will "court unpopularity". Yet being outside the tent would risk not only public anger for walking out of Government in the country's hour of need, but it would also destroy the party's ability to get some of its manifesto introduced.

There may be moans and groans from some traditionalists but party officials know there is likely to be little serious damage from this year's jamboree. Imagine the conference next year, however, when the party could be meeting as spending cuts bite with benefits being reduced and cherished services scaled back, a referendum on voting reform – a key Lib Dem demand in forming the coalition – having been lost and with Labour united around an established and media-savvy leader.

To survive that scenario, the grassroots will need to be convinced over the next five days that it is worth holding on for the entire ride – and that the banning of knitting needles from the conference hall is a price worth paying if it means the Lib Dems being in power, and being able to influence policy from inside Downing Street, rather than shouting from the sidelines.