Alliance With Social Democrats
When the Labour government fell in 1979, the Conservatives under Margaret Thatcher won a victory which served to push the Liberals back into the margins.
In 1981, defectors from the moderate wing of the Labour Party, led by former Cabinet ministers Roy Jenkins, David Owen and Shirley Williams, founded the Social Democratic Party. The new party and the Liberals quickly formed an alliance, which for a while polled as high as 50% in the opinion polls and appeared capable of winning the next general election. However, they were later overtaken in the polls by the Conservatives and at the 1983 general election the Conservatives triumphed by a landslide, with Labour once again forming the opposition, while the SDP-Liberal Alliance came close to Labour in terms of votes (a share of more than 25%) although it only had 23 MPs compared to Labour's 209.
The 1987 election saw the Alliance's share of the votes drop slightly and it now had 22 MPs, and in the election's aftermath Liberal leader David Steel proposed a merged of the two parties. Most SDP members voted in favour of the merger, but SDP leader David Owen objected and continued to lead a "rump" SDP, with the merger of the two parties being completed in March 1988 to form the Social and Liberal Democrats, becoming the Liberal Democrats in October 1989.
Read more about this topic: Liberal Party (UK)
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