Shirley Williams: 'If you give up what you care about, you start dying' - At 80, Shirley Williams shows no sign of retiring. Not now the Lib Dems are finally in power - and sleeping with the enemy

Shirley Williams has just turned 80. Yes, there was a little birthday party, and lunch with her daughter, but nothing more. "That's enough to be going on with, thank you," she says. There's no time to waste for Baroness Williams of Crosby, now that her party's finally got a share of government.

What would you like to talk about, she asks when the Guardian requests an interview. Simple, we say - is the Liberal Democrats' coalition with the Tories a betrayal of everything you have ever stood for? Good question, she replies. "I was pleased because you were absolutely frank. That was good."

Stories of coalition disagreements have been mounting by the day: more than half of Liberal Democrat MPs are opposed to David Cameron watering down security of tenure for council house tenants ("Too simplistic," says Williams of the objections, "but what I will say is when people are entitled to affordable housing, their tenure should be absolute"), and there is to be a motion at next month's Lib Dem conference urging parents not to send children to free schools ("I haven't made up my mind how I'll vote yet," she says, "but I have always made it plain I'm not in favour of academies"). Yet Williams insists the disagreements are a sign of healthy democracy. "What we have to do is get as much as one possibly can of what Lib Dems believe into the coalition programme. It's no good simply saying our role is to say no to everything."

Williams admits she was astonished by the recent election: by the anger she confronted throughout the country when campaigning, by how eloquently the electorate told the political classes that they didn't trust any one party to run the country. "What came over and over again was people saying, 'Why can't you bloody lot work together? We're fed up to the back teeth with Punch and Judy politics.' You may think it's rather emotional of me, but I thought it was almost a last call for democracy to work. After the expenses scandal people were giving us a last chance, and that was a major factor in me thinking we had to work with another party."

More than anything, she is astonished that the party she helped to found ended up in a coalition with the Conservatives. It's a scenario she had simply never considered. "I'm making no bones about this, almost to the very end I argued for there to be a Labour-Lib Dem coalition. But Labour had already turned their mind to how they were going to rebuild - they weren't interested in a coalition and treated us with considerable contempt."

Having said this, she accepts that outcome would have made for a government so compromised as to be unworkable, just like the one she served in as a minister in the late 1970s. "And when I realised it wouldn't work because there wasn't the majority, my preferred choice - which may have been very irresponsible of me - was for a minority Conservative government." Why? "It was a slightly selfish position. We wouldn't have been forced to support things we didn't agree with. It was about protecting the legacy of the Lib Dems. I didn't want to see the Lib Dems, who I've always regarded as a left-of-centre party, suddenly becoming a right-of-centre party."

So what is it like to end up in bed with the Tories? "Not one bed," Williams says sharply. "Two beds." She pauses. Actually, it's not always two beds. "I find myself in bed with Ken Clarke on an awful lot of things the public would describe as liberal, and I'm perfectly happy there." Williams has a way with unintended double entendres.

She has shrunk a little and her hair is silver now, but Williams hasn't changed much over the years - huge blue eyes with heavy lids, an intelligent face, brusque and kind at the same time. Her room could be a monument to the old-fashioned office - paper, paper everywhere; reports, reminders, parliamentary bills, everything physically documented and catalogued. On one cabinet sit half a dozen birthday cards, a plaque on her wall says, "Question Time: Most frequent panellist award", a photograph of her and the late US senator Edward Kennedy vies for attention with one of her two grandchildren.

Daughter of the feminist and pacifist writer Vera Brittain, Williams has been married twice, and was first elected a Labour MP in 1964. As secretary of state for education and paymaster general she held two cabinet posts simultaneously in the Callaghan government, but lost her seat in 1979. Unhappy with the far left, she quit Labour in 1981, formed the SDP (which merged with the Liberal party in 1988) and became its first MP later that year when she won a seat in Crosby, Merseyside. After a stint working at the Kennedy School of Government at Harvard, she became a life peer in 1993.

Does she still work at her office full-time? "Oh yes - and sometimes when there's nobody else in the place. If you give up what you most care about you start dying. It doesn't matter what age. Would you like a tea or coffee? I fear it's instant because I've got nobody but me here at the moment." Does she want a hand? "No, you stay here and enjoy yourself.

"So do you want to get on to what I don't like about the coalition," she says eagerly. Williams looks at the list she has compiled. Three main things, she says. "Academies. Health. And Trident. Right, academies: I mean, I hate the academies. I don't pretend not to." She sips her drink, and a look of displeasure spreads across her lips. "I think you've got my coffee. This is tea." I hadn't wanted to mention it - Williams isn't someone you'd accuse of handing you the wrong drink.

Williams has campaigned all her working life for an egalitarian comprehensive system, and when the academies bill went through the House of Lords she fought like mad for changes to limit their powers. Not that anybody would know, she says, with a reproving look, because nobody reported it. "They now have to make provision for special educational needs, and they accepted from us changes about consultation with any school that was about to become an academy ... The Lords spent 31 hours reforming the academies bill, and ministers have said the bill that came out is very different from the one that began."

Williams was ambivalent about accepting a peerage, but ultimately she wanted to continue campaigning, and the best place to do that was from the Lords. "I agreed that I wouldn't use the title. I can show you my cheque book." She hands me the cheque book, belonging to Mrs SVTB Williams. Blimey, I say, four first names. "Oh I can't help my parents. Shirley Vivien Teresa, and Brittain like my mother. But being a Guardian man you'll kindly note there's no title, right? Even though somebody said to me, 'Of course you'd get an overdraft if they knew you were a baroness.' Anyway, that's by the way, let me finish.

"I'm very worried about health. I'm a passionate believer in the health service, I've never used private medicine in my whole life." She believes the NHS is "by and large wonderful" and the proposed restructuring is as unnecessary as it is dangerous. "We looked at [Andrew] Lansley's white paper, and it's got a lot of holes in it. For example, what happens if a foundation hospital has a deficit or a surplus, where does the money go, to whom is it accountable? There's no system of accountability of a democratic kind, except for the bit the Liberal Democrats have put in, which is not very strong, but all credit to our guy for doing it."

Williams is aware that critics argue this is a preliminary step towards privatisation of the NHS. And yes, she is fearful. "What I do know is that if there was any sign we were moving towards privatisation of the NHS, a lot of Liberal Democrats would not put up with that." Would Nick Clegg? After all, power is pretty intoxicating, isn't it? "Oh to be fair to the man, I think he would feel this was a red line."

Finally, she says, her third concern: Trident. "I don't think the Ministry of Defence can possibly restrict the discussion about Trident. It's one of the biggest existential problems we have to resolve. It's not just about value for money, we have to discuss whether as a country we want to see the deterrent reduced or even abolished." She thinks the Tories are totally out of step with America on nuclear arms. "We're living at a time when the cold war is gone, and we have in [Barack] Obama a president who is trying to move towards nuclear disarmament. If we go ahead and replace Trident when our dear ally is desperately trying to get the world to reduce nuclear weapons, what do you think the political impact would be? It would be devastating."

Williams wants to make sure we cover the positive elements of the new government as well. "I really do think the coalition hasn't had the credit it deserves on civil liberty issues," she says. "All my prison reform friends are jumping with delight. This is the first time since Roy Jenkins or Kenneth Clarke that they've heard a liberal voice from the Home Office, or Ministry of Justice as it is now. There's the decision to go back to the torture thing, to say this mustn't go on any more. And there's the chucking out of identity cards and the excessive surveillance which was getting suffocating. There's detaining asylum kids - that was appalling. Lib Dems always took a strong line on that. This is a whole area where the government is going to be a lot better."

Does Williams think the progress on civil liberties has been a result of Lib Dem strength or Conservative cost-cutting pragmatism? "Oh it's both. When you see the rightwing of the Tory party saying 'Oh my God, I didn't realise we spent £35,000 on keeping people in jail for a year,' then you've got an argument that carries weight with them. If I got up and said, 'It's absolutely awful the way we put so many people in prison to no purpose at all and 67% recidivism,' they look at you with glazed eyes." And, of course, she is pleased at the possibility of reform to the electoral system, however limited. "I hope you'll give the positives their share, because it's an important part of who I am."

She threatens to get in touch if the piece is unbalanced and, when I get up to leave, says she best take my phone number. "How will I bollock you otherwise?" As for our initial question, despite her many fears, she says the answer is no: the coalition is not a betrayal of everything she has stood for. But has she wondered whether this is still her party, since the election? "I'm a social democrat," says Williams. "I was that in the Labour party and I'm that today in the Liberal Democrats - and the reason I went from one to the other was because I didn't think the Labour party was liberal enough. I think I've rather boringly stood in the same place all my life."

Has she had any crisis of conscience or identity over the past couple of months? "Yes, I've found it very hard to live with the academies bill, so I had to put all my effort into changing as much as possible."

When I ask whether she'd accept an invitation from Clegg or Cameron to join the cabinet, she laughs. "I doubt they would. But it's too late." Why? "Too old. Just that, too old. Also, I'm not under the illusion that cabinet ministers are particularly influential. Don't forget, I was one for a long time. I'd probably have more influence outside than I would in."

As she carries the cups to the kitchen and washes them out, she considers whether this period of government will be good for the Liberal Democrats in the long term. "It will be strengthened by people no longer being able to say we've got no experience, which has been a major hazard for us. On the other hand, I think it will depend on the outcome. The jury's still out."

What would her advice be for Clegg? "Listen very closely to what the party tells you and see how far you can go to meet it." Has he been listening closely enough so far? "I think he's probably excited by government so he hasn't had enough time to listen a great deal, but in fairness he does go out a lot to listen … I think we'll know much better after the Lib Dem conference. It will be quite lively."