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That's my view of the situation. The Lib Dems were formed after the merger of two centrist parties- the Liberals and the SDP which, as another poster pointed out, were a right-wing breakaway from Labour. As Labour moved to the right the Lib Dems have increasingly courted dissaffected left-wing voters, and have adopted some significant left-wing policy positions (such as a 50% top rate of income tax)- whilst some positions they always had which used to be seen as centrist in relation to "Old" (pre-Blair) Labour have arguably become regarded as left-wing in relation to Blair's "New" Labour. However, they still have many very right-wing members (I've dealt with them in local politics), and some pretty right-wing figures within their leadership. At the local level, Lib Dems tend (I stress tend) to be more definitively to the right of Labour and sometimes rule in coalition with the Tories (something I have never heard of, and frankly cannot imagine, Labour doing- but I'm open to being corrected). At the national level, things are complicated by the fact that Blair is probably to the right of 90% of Labour Party members, whereas Lib Dem leader Charles Kennedy is usually regarded as being on the left of his party.
So overall, I would say both Labour and the Lib Dems are both generally left of centre- it is confusing, in large part because Blair has changed the political landscape so much by moving Labour so markedly rightwards. Both parties are left struggling with their identities, while the Tories have a clear identity which most people despise. However, I should note that both Labour and the Lib dems are generally well to the left of the US Democratic Party, in my opinion. Hope that is of some use- as a disclaimer I must add that I voted Labour today, and Lib Dem supporters may or may not see things somewhat differently...
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