The Conservatives, who had been in power before the election, tried to form a minority government. However, the Liberals and (unsurprisingly) Labour refused to support them on the King’s Speech.
Liberal leader, Asquith could potentially have formed a minority Liberal government, or a coalition with one of the other parties. Instead, he let Labour form their first administration with the words:
"There could be no safer conditions under which to make the experiment" of a Labour government.
Asquith was right in the sense that the first Labour government was not dangerous - indeed it was safe, proper, unadventurous and pretty much unobjectionable, even to its opponents.
However, the experiment turned out to be worse than dangerous for the Liberals. Once Labour had become a party of government, the Liberals appeared to have lost their purpose and were punished at the next election, held less than a year later in October 1924. Labour lost office in 1924, but the Liberals lost almost three-quarters of their seats, crashing to only 40 MPs.
The precedent of 1923 is pretty scary for all parties.