William Wallace: We should welcome the benefits of the coalition – just think of the alternative

Either of these would have been weak, unstable, prey to blackmail from those it needed to gain a majority, and likely to collapse within nine to 12 months – a disaster for the economy and for public confidence in our political system.

This is a different government, a formal coalition, within which constant negotiation between the two parties has replaced the factional intrigues that characterised the dysfunctional coalition that was New Labour. It's based on a 35-page Coalition Agreement, in which both parties made concessions to each other and established a fair amount of common ground.

Adjusting to this new style of government has been painful, both for many Conservatives and for many Liberal Democrats.

Westminster politics has traditionally been a matter of executive government driving through whatever ministers want, and oppositions denouncing whatever governments propose.

Co-operation among parties, changes in policy to accommodate other points of view, don't fit the mindset of partisan backbenchers, or of lobby correspondents whose preferred story is about dispute and division.

Councillors in all parties, with hard-won experience of coalition at local level, are much less shocked by government as co-operation and compromise than those who have spent their careers inside the Westminster "bubble".

Labour has found it far more difficult to adjust. It was a mixture of frustration and rage that fuelled the appalling behaviour of the Labour benches in the Commons when Nick Clegg took Prime Minister's Questions last week, forcing the Speaker to shout for order above the noise.

Their rage comes from a sense that the Liberal Democrats "belonged" to the Left, and ought to have been loyal to a junior partnership on whatever terms Labour was willing to offer.

Their frustration follows from confusion at watching the coalition push through progressive measures that Labour opposed – cutting back on prison building, strengthening civil liberties and the rights of the accused. When Ken Clarke is so clearly to the left of Jack Straw on issues of crime, punishment and liberty, it is hard for Labour MPs to claim that they represent the progressive Left, while Liberal Democrats have conspired with a reactionary government.

The broadest area of common ground the two parties in government have established is over shifting power back from London to local

communities. They have started to dismantle the apparatus of central targets and controls through which Whitehall exerted detailed control over local government and local services.

There is much more work to be done on the financing of local services, and on the balance between all-purpose local authorities and community initiatives. Liberal Democrat ideas about active local engagement through "community politics", and David Cameron's vision of a "Big Society", address similar problems from different perspectives; the parties will have to negotiate a shared approach.

It's now becoming clear how far Gordon Brown was putting off tackling the budget deficit. There had been no review of defence commitments since 1998; forward projections on defence equipment orders are far above resources available.

Alistair Darling proposed large spending cuts in his Budget last March, including cuts of up to 50 per cent in public investment – now denied by many Labour politicians in their attacks on the painful cuts now

under way. Darling has now admitted that he wanted to raise VAT, to bring in additional revenue, but was overruled by Brown, leaving a widening gap between spending and revenue.

The coalition took early action to avoid the UK being caught up in the international debt crises that have engulfed Ireland and Greece, and threatened Spain.

Ministers from both parties expect to be deeply unpopular this autumn, when the Comprehensive Spending Review is published. They calculate that economic recovery, and the rise in revenue that it will bring, will in time restore public confidence and support – and they are in this government for the long haul.

Opinion polls will go down and up. Right-wing Conservatives will rage at this soft-centre consensus government – as David Davis did in the aptly-named "Boot and Flogger" last weekend. Radical Liberal Democrats will protest that their leaders have made too many concessions to the Conservative enemy.

Both parties will have to work hard to maintain their distinctive traditions and identities as they jointly manage the rough business of government. But the outcome should be better government.

If you're still not sure about the benefits of coalition, ask yourself if you'd prefer a government dominated by an unchecked Prime Minister and a single party, another Thatcher or Blair, or a continuation of Gordon Brown. Doesn't that thought make the case for a different style of government?

Lord Wallace of Saltaire is a Liberal Democrat peer and a government whip.