Factbox - Liberal Democrats, party and policies

LONDON (Reuters) - The Liberal Democrats, the junior party in Britain's coalition government, hold their annual conference from Saturday, the biggest gathering of members since they entered government in May.

Liberal Democrat leader Nick Clegg, 43, became deputy prime minister after seizing the chance offered by an inconclusive vote to join the first peacetime coalition government in Britain since the 1930s.

However, poll ratings have fallen and many Lib Dem party members are uneasy about the alliance.

Following are chief facts about the "Lib Dems."

POLICIES

The unexpected alliance with the Conservatives was helped by an affinity between Clegg and Conservative leader David Cameron, now prime minister. They come from similar wealthy, well-educated backgrounds, both have young families and are close in age -- they were born within three months of each other.

Differences on how fast to tackle Britain's record budget deficit following the global financial crisis -- the country's most pressing political issue -- were smoothed over in five days of coalition talks.

Clegg's party came round to the Conservative point of view that spending cut should start swiftly, dropping previous concerns that this would put economic recovery at risk.

In June the coalition agreed a budget that called for cuts of 25 percent across most state departments, with the details to be unveiled in October after a spending review.

The Liberal Democrats set aside their opposition to new nuclear power stations and to a replacement for the Trident submarine nuclear deterrent. A promise to scrap unpopular university tuition fees for students was also dropped.

In return they won agreement for a referendum on a change to a more proportional voting system in national elections. This is a long-held Liberal Democrat goal after decades of losing out in Britain's "winner-takes-all" electoral system.

Despite winning 22 percent of the national vote in 2005, they won only 10 percent of the seats in parliament, and fared even worse in May despite a slight rise in their voting share.

POWER

As well as Clegg taking the position of deputy prime minister, the Liberal Democrats gained four other seats in the 23-member coalition cabinet. These included the control of two state portfolios, the departments for energy and business (which includes higher education).

Business minister Vince Cable, 67, now has the politically sensitive task of reforming student financing. Cable shot to prominence during the banking crisis, when he won widespread praise for his no-nonsense warnings of looming financial peril.

Chris Huhne, 56, a nuclear sceptic and green advocate, was made energy minister. He has confirmed the coalition will not block new nuclear plants, but insists they will have to be funded from private sources.

Danny Alexander, 38, is deputy to the Conservatives' finance minister, Chancellor George Osborne, in the position of Chief Secretary to the Treasury.

Alexander was unexpectedly promoted to the senior economic role after the Liberal Democrats' previous incumbent, former banker David Laws, resigned within weeks of his appointment over an expenses scandal.

HISTORY

The Liberal Party was formed in 1859 and can trace its roots back to the 17th century and the struggle of the Whigs to assert the supremacy of parliament over the king.

The last Liberal prime minister was David Lloyd George from 1916 to 1922. The party was overtaken in the 1920s by the union-backed Labour Party as the main opponent of the centre-right Conservatives.

By the early 1950s the Liberal Party was almost wiped out as a national force, winning just 2.6 percent of the vote and with only 5 members of parliament. But its fortunes gradually revived as voters sought alternatives to the two leading parties.

It became the Liberal Democrat Party after a 1988 merger with the short-lived Social Democrats, a Labour splinter group.

In the 2005 election the party had its best performance for 80 years, winning 62 seats in the 650 seat parliament.

Despite dipping to 57 seats in the May election the party found itself in the position of kingmaker after neither of its rivals won an absolute majority.

(Reporting by Tim Castle; editing by David Stamp)