Defeat is Brown's 'John Major moment'

However a Labour MP called the disastrous results a "John Major moment". Derek Wyatt, who has a majority of just 79 at Sittingbourne and Sheppey said: "Gordon has committed spectacular own-goals and the public is punishing him for it."

He was referring to the drubbing Mr Major received in council elections in 1995 - a defeat that symbolised the loss of the middle-classes to New Labour.

The Prime Minister admitted to "a bad night" in the town hall polls but promised to "learn the lessons" and not give up.

"My job is to listen and to lead and that's what I will do," he said at No 10. Mr Brown spoke after the worst Labour defeats for 40 years. The party was battered into third place, with an estimated 24 per cent of the vote.

Labour had lost 226 councillors by this afternoon and lost control of councils Reading, Merthyr and Hartlepool and, to the shock of veterans, was crushed in heartlands such as Wales.

Signalling his intention to stay in charge of his party, Mr Brown went on: "The test of leadership is not what happens in a period of success but what happens in difficult circumstances. The challenge of leadership is to take the country through difficult times, as well as through good times. The challenges show that we have the strength and the resolution, as well as the conviction and ideas to take the country forward."

David Cameron's Conservatives surged to 44 per cent - a result that gives him a serious claim to be called prime minister in waiting. Mr Cameron embarked on a lightning tour of his key gains in Bury, the West Midlands and Glamorgan.

Speaking outside his London home, he called it "a very big moment for the Conservative Party". He claimed: "I think these results are not just a vote against Gordon Brown and his government, I think they are a vote of positive confidence in the Conservative Party."

A victory for Boris Johnson tonight over Ken Livingstone in the London mayoral contest would badly hole Labour morale across Britain.

Despite recent criticism, Nick Clegg's Liberal Democrats leapfrogged Labour to gain a 25 per cent share.

He said: "Politics is very much on the move. It is much more fluid than it has been for many, many years. Everything is up for grabs." Mr Clegg's party grabbed control of Kingston-upon-Hull from under the noses of local MPs John Prescott and Health Secretary Alan Johnson.

Labour's vote share was two points below the 26 per cent achieved four years ago when the same seats were fought against a backdrop of Iraq war protests. It was worse than the record lows recorded under Michael Foot in the Eighties or Harold Wilson after the 1968 devaluation.

Other big Tory gains were North Tyneside, for the first time in 30 years, the Vale of Glamorgan and Redditch - each marking solid advances into the critical territory needed to win a general election.

Also damaging to Labour morale were gains for the smaller parties. Greens were celebrating in Norwich, where they over-took the Lib-Dems to become the main opposition grouping on a council for the first time in their history - just two seats behind Labour. The far-Right British National Party gained eight seats - two each in Rotherham, Nuneaton & Bedworth and Amber Valley and one each in Pendle and Thurrock.

The inquest into Labour's collapse was awaiting the outcome of the London race.

Labour ministers blamed economic turmoil and the cost of living, implying it was down to issues out of their control. But many Labour MPs blamed Mr Brown for ignoring their appeals for a change of heart over the 10p tax until too late.

Deputy leader Harriet Harman admitted: "We didn't respond early enough to those groups of people who were going to lose out as a result of the change in the 10p rate."