This is what I think should happen now that we have a hung parliament:

A Labour/Lib Dem coalition seems like the best solution for the country, with the understanding that there will be another election in the near future.

Gordon Brown has to go. The vast majority of the electorate will be fuming if he remains as Prime Minister. Labour should negotiate a coalition on the basis of a new interim leader (and phrase it as this, not as a permanent PM). David Miliband seems best placed for this.

The Liberal Democrats need to have the balls to stand up for electoral reform and proportional representation. They should not form a coalition unless they get a commitment to a referendum on PR. This will be their only chance of breaking through the two-party system for the foreseeable future, if at all.

In order to save face as they form a coalition (and not just look like the lapdogs of Labour), the Lib Dems must make another demand in exchange for their support, and that is for Vince Cable to become Chancellor of the Exchequer. According to polls, this is exactly what the public wants, and given his credentials and general robust analysis of the financial crisis, the markets should also react well to this.

As for the Tories, they will obviously not take the formation of the above coalition easily. But as long as the Lab/Lib bloc make it absolutely clear that the idea is to have a period of stability before another election then the Tories can’t complain too much. They will, however, fight tooth-and-nail to avoid electoral reform because of how much change it would bring to the political system (ironic considering their campaign rhetoric). The challenge for the Lib Dems is to navigate these choppy waters successfully.

To have a referendum on PR, followed swiftly by another election, would be a massive shift in UK politics, and may be a complete pipe dream. But I honestly think that an explicitly interim government, with a strong, capable and popular Chancellor, is an attractive option for the political system as a whole.