Nick Clegg has fuelled speculation that he is positioning for coalition with Labour next year by saying he believes Ed Miliband's party has "changed".
The Deputy Prime Minister also criticised the Tories for lurching to the right, accusing his current partners in government of becoming "much more ideological" since 2010.
The comments, in a BBC Radio 4 documentary, follow an apparent thaw in relations with shadow chancellor Ed Balls. The animosity between the men had previously been regarded as a major obstacle to the two parties joining up if there is a hung parliament after next May's general election.
Asked about Labour on the programme, Mr Clegg said: "I think they've changed. I think there's nothing like the prospect of reality in an election to get politicians to think again and the Labour Party, which is a party unused to sharing power with others is realising that it might have to."
He said that if such a pact was formed, the Lib Dems would set out to restrain Labour from spending too much.
"There is just no doubt in my mind that if there were a Labour-Liberal Democrat coalition, we the Liberal Democrats would absolutely insist that government would not break the bank," he added.
Amid signs of growing tensions with David Cameron's party after nearly four years of government, Mr Clegg said: "I think the Conservative Party has changed quite dramatically since we entered into coalition with them.
"They've become much more ideological, they've returned much more to a lot of their familiar theme tunes...
"I think it would be best for everybody if the Conservative Party were to rediscover a talent for actually talking to mainstream voters about mainstream concerns."
:: The second part of 'Nick Clegg - the Liberal who came to power' is broadcast tonight 8pm on BBC Radio 4