Prime Minister David Cameron said today Britain's first coalition government since 1945 would be strong enough to survive a full five-year term and tackle the worst economic crisis in decades.
Speaking this afternoon at a joint press conference in the Downing Street grounds, the Conservative leader said the key purpose of the Conservatives and Lib Dems government was a "strong, stable and determined leadership for the long term".
Mr Cameron said there was a shared resolve to usher in a new kind of politics in which the national interest was more important than the party interest, in which there was "co-operation rather than confrontation", in contrast to what Mr Cameron said was "chronic short-termism" of the previous government.
Declaring that no modern British government had inherited such a terrible economic situation, the Tory leader said he nonetheless believed there were better times ahead, before inviting Mr Clegg to address the press conference on "a remarkable and very welcome day".
The Lib Dem leader said he believed a new "radical, reforming" government that was also a source of support was needed during these difficult times. Conceding there would be "bumps and scrapes" along the way, Mr Clegg said the coalition parties were united by an ambition to return power to people and communities of the United Kingdom to change the country for the better.
In a slightly uncomfortable moment, Mr Cameron was asked by one journalist about once being asked about his favourite joke and replying "Nick Clegg". After the Liberal leader jokingly said he was off, he was called back by Mr Cameron, who said both men would have things said thrown back at them.
"Until today we were rivals and now we are colleagues," Mr Clegg told reporters. "That says a lot about the scale of the new politics that is starting to unfold."
Mr Cameron, who became Britain’s youngest prime minister in 200 years last night, has made major concessions to the Lib Dems to secure a five-year coalition deal. Liberal Democrats leader Nick Clegg is to become deputy prime minister – one of five Liberal Democrats to join the Cabinet.
The new prime minister's close friend George Osborne becomes chancellor of the exchequer and will publish an emergency budget within 50 days containing £6 billion of measures. Mr Osborne is part of an old Anglo-Irish aristocratic family and is heir to the Osborne baronetcy of Ballentaylor in Co Tipperary.
The Liberal Democrats’ treasury spokesman, Vince Cable, will be his deputy as chief secretary to the treasury, second-in-line to Mr Osborne. The Lib Dems will have junior ministers in other departments.
Former Conservative leader William Hague is, as expected, the new foreign secretary, while his party colleague Andrew Lansley will take over as health secretary and Theresa May as interior minister. Another former leader in Iain Duncan Smith is also elevated, as the new work and pensions secretary.
Tory Liam Fox will be defence secretary. The Conservatives have pledged to undertake a rapid review of the armed forces, and the sector is seen as ripe for spending cuts to reduce Britain's record budget deficit.
Owen Paterson has become Northern Ireland Secretary of State, while Danny Alexander will have the equivalent Scottish job, while Cheryl Gillian will become Secretary of State for Wales.
Mr Hague told the BBC there were no major differences between the two parties on Afghanistan, where Britain is fighting an unpopular war. He also said neither party was in favour of handing more powers to the European Union. The EU was seen as a stumbling block to a coalition deal between the pro-EU Lib Dems and the anti-EU Conservatives.
Mr Cameron is establishing a National Security Council and has appointed senior civil servant Peter Ricketts as his national security adviser, a new role based at the Cabinet Office. The council will oversee all aspects of Britain's security, the prime minister's office said.
Under the coalition deal, the Conservatives conceded a referendum on limited electoral reform and abandoned plans to cut inheritance tax. In turn, the Liberal Democrats agreed to abstain on any Commons vote to offer tax concessions to married couples, which they oppose. The Conservatives believe that with a Liberal Democrats’ abstention they will get enough support elsewhere to get it through.
Mr Clegg said he hoped the coalition would mark the creation of a “new kind of government” in Britain.
Following the “overwhelming” endorsement of the plan by the party’s MPs and Federal Executive in a meeting which dragged into the early hours of this morning, Mr Clegg acknowledged there would be “many doubts” about the arrangement.
He directly addressed the seven million voters who backed the party in the general election, implicitly acknowledging that many would be unhappy at the prospect of a coalition with the Conservatives.
“I am acutely aware that I carry your hopes and your aspirations with me into this coalition agreement,” he said. “I can imagine this evening you will be having many questions, maybe many doubts, about this new governing arrangement.
“But I want to assure you that I wouldn’t have entered into this agreement unless I was genuinely convinced that it offers a unique opportunity to deliver the kind of changes you and I believe in.
“So I hope you will keep faith with us, I hope you will now let us prove to you that we can serve you and this country with humility, with fairness at the heart of everything we do and with total dedication to the interests and livelihoods of everyone in Great Britain.”
There was a “lot of heart-searching” from Liberal Democrat MPs over the coalition deal with the Tories, the party’s deputy leader, Mr Cable, said today.
Talks with Labour “broke down primarily because the Labour Party wasn’t committed to making them work,” Mr Cable said.
“It’s very understandable, there’s no blame attached to that, the fact is the numbers didn’t really stack up," he added. "It’s very clear over the last few days that growing numbers of Labour Party people accepted that they were going into opposition so there was no real commitment to make this work.”
The Liberal Democrats have accepted that £6 billion worth of cuts will happen this year, the timing of which they opposed during the election, though the package of measures necessary will be subject to Bank of England and Treasury advice.
Last night, Conservatives sources said deficit reduction was "at the very heart" of the agreement, emphasising that both parties had agreed that the majority of the money necessary will come from spending cut, and not higher taxes.
Just minutes after he became prime minister, Mr Cameron gave warning of the tough decisions ahead, saying that "difficult decisions" lie ahead. “This is going to be hard and difficult work.”
The Conservative leader was taken by surprise by former prime minister Gordon Brown’s decision to go to Buckingham Palace to meet Queen Elizabeth hours before a formal agreement was reached between the Conservatives and the Liberal Democrats.
Additional reporting: Agencies