Two former cabinet ministers yesterday called for a secret ballot of MPs to decide if Prime Minister Gordon Brown should lead the Labour Party into an election due by June.
Mr Brown's spokesman said the prime minister was "relaxed and getting on with the job," while Business Secretary Peter Mandelson and other senior ministers said Mr Brown still has his cabinet's full support.
"No one should over-react," Mandelson said. "The prime minister continues to have the support of his colleagues. We should carry on government business as usual."
The move brought to head long-simmering discontent over Mr Brown's leadership just months before an election which the Conservatives are expected to win. The most likely poll date is May 6 - four months from yesterday.
Labour MPs cannot force a leadership race and there is no provision for a secret ballot under the party's rules. But the news sent sterling down 0.3 per cent against the dollar and analysts said the uncertainty was bad for gilts and the pound.
The timing was a surprise as many commentators feel it is too late to replace Mr Brown before the election and Labour has started to claw back some ground from the Conservatives in recent opinion polls. There is no obvious successor to Mr Brown.
"Many colleagues have expressed their frustration at the way in which this (leadership) question is affecting our political performance," Geoff Hoon and Patricia Hewitt said in a letter to Labour members of parliament.
"We have therefore come to the conclusion that the only way to resolve this issue would be to allow every member to express their view in a secret ballot." Mr Hoon and Ms Hewitt have served in a variety of government posts. However, Hewitt was planning to stand down at the next election and it is not clear how much support they command among Labour MPs beyond those who have long been critical of Mr Brown.
As unusually heavy snow fell across the country and cloaked the houses of Parliament, Labour figures said the challenge had little chance of gathering momentum and would soon melt away.
"It is not what the Parliamentary Labour Party wants nor frankly what the British public wants," Tony Lloyd, chairman of the parliamentary Labour Party told BBC television.
Mr Brown served as Chancellor for a decade under Tony Blair before replacing him mid-term in 2007. Mr Brown's critics say he lacks charisma and his ratings have suffered during a deep recession and an increasingly bloody campaign in Afghanistan.
The Conservatives, seeking a return to power after 13 years, pressed their calls for a general election as soon as possible.
"Ministers are more concerned about saving their own political skin than actually getting Britain out of the monumental mess we are in," said party chairman Eric Pickles.
"We cannot go on like this. The only responsible thing the government can do is call a general election."
Political commentators said rebels had fluffed their chance of ousting Mr Brown last June when several ministers, including Mr Hoon, resigned but a rebellion petered out.
"Now, in an election year itself, to call for a secret ballot of the parliamentary party, looks hugely self-indulgent by two ministers who are on the downslope themselves in that the best of their career has gone, and I think that is the way the parliamentary party frankly will view this," said Jonathan Tonge, head of politics at Liverpool University.
Economists said markets did not want political turbulence.
"I would have thought the knee-jerk reaction to this would probably be negative, as there is already uncertainty about the possibility of a hung parliament and the impact that would have on the timing of fiscal consolidation," said Jonathan Loynes, UK economist with Capital Economics.