Brown resigns as Lib Dems talk to Labour

Gordon Brown last night announced he will resign as Labour leader - but offered to stay on as Prime Minister in a potential power-sharing government with the Liberal Democrats until his party has chosen a successor.

Announcing his decision to hand over the Labour leadership, Mr Brown said: "The reason that we have a hung Parliament is that no single party and no single leader was able to win the full support of the country.

"As leader of my party I must accept that as a judgment on me. I therefore intend to ask the Labour Party to set in train the processes needed for its own leadership election.

"I would hope that it would be completed in time for the new leader to be in post by the time of the Labour Party conference.

"I will play no part in that contest, I will back no individual candidate."

Mr Brown clearly felt, after Mr Clegg had formally requested opening negotiations with Labour, that his party's only chance of succeeding in talks to head off Mr Cameron moving into No. 10 was to quit.

The Prime Minister said his aim was to ensure a "stable, strong and principled government" was formed.

It was "sensible and... in the national interest" for Labour to respond positively to the Lib Dems' overture, he said, adding: "The first priority should be an agreed deficit reduction plan to support economic growth and a return to full employment."

Mr Brown said he had asked the Labour Party to set in train the formal mechanism to replace him, after insisting he was confident an administration could be formed with Lib Dem allies to command a majority in the Commons.

But Conservatives made a last-ditch attempt to forge their own deal with the Liberal Democrats, offering a referendum on the Alternative Vote electoral system for Westminster elections.

Following a meeting of Conservative MPs in the House of Commons, shadow chancellor George Osborne said the referendum proposal was being put to the Lib Dems as part of a final offer on a power-sharing deal.

The AV system, which involves voters numbering candidates in order of preference in single-member constituencies, was backed by Labour in its election manifesto but falls well short of the truly proportional systems preferred by Lib Dems.

Mr Brown said Lib Dem leader Nick Clegg had formally asked yesterday to open negotiations with Labour on a possible deal on the formation of a new government.

The request came after Mr Clegg addressed his own MPs on the progress of talks with Conservatives which have stre-tched over four days since the inconclusive result of Thursday's General Election.