Talks between Liberal Democrats and Conservatives have resumed over the possibility of forming a power-sharing government.

The new discussions came after almost three hours of negotiations in the morning between Lib Dems and Labour, followed by the surprise news that at the same time party leader Nick Clegg was involved in face-to-face talks for more than an hour with David Cameron.

The Conservative leader had said it was "decision time" for the Lib Dems, who have been holding open the possibility of a pact with either of the other two parties during the five days since last Thursday's inconclusive General Election.

Tories have extended what they described as their final offer to Lib Dems of a formal coalition with a referendum on voting reform.

Entering the talks at the Cabinet Office in Whitehall, Conservative negotiator William Hague said: "As you know, we believe very strongly there should be a government with a strong and secure majority in the House of Commons and, of course, an elected prime minister.

"We remain very, very firmly of that view. We set out our proposals to achieve that yesterday and we have come here to hear the Liberal Democrat response."

Energy Secretary Ed Miliband, a member of the Labour negotiation team, described this morning's meeting with the Lib Dems as "constructive".

Speaking outside 10 Downing Street moments after the new Tory/Lib Dem talks were announced, Mr Miliband said: "I think there are many points of agreement... I thought there was a good atmosphere and a good constructive basis for our discussions.

"Since yesterday the Lib Dems have been talking to both the Conservatives and ourselves. I hope our discussions will continue because I think there are points of agreement and other issues to work through."

The Prime Minister returned to No 10 this afternoon following a short visit to the House of Commons, where it is thought he was briefed on the Lib Dem talks by his negotiating team, led by Lord Mandelson. He kicked off a Labour succession race on Monday by announcing that he would step down as leader by the time of the party's annual conference in September.