Menzies Campbell resigns as leader of the Lib-Dems after just two years

Party chairman Simon Hughes - who delivered a statement from the 66-year-old - said he had given "purpose and stability" to the party in his two years as leader.

"He has hugely professionalised the working of our Party and led its very successful preparations for the next general election.

"Ming has made this decision - as all his political decisions - in the interest of his Party and Liberal Democracy throughout Britain.

"Every Liberal Democrat owes Ming a huge debt of gratitude," Mr Hughes said.

His comments were significantly different in tone from his veiled threat at the weekend that the leadership's "always an issue".

In an interview for GMTV's Sunday programme Mr Hughes - who stood against Sir Menzies in the poll for party leader - said: "Everybody accepts it wasn't a great start, that he's improved considerably."

But he added: "The leader has to continually do well and better."

Tonight's resignation announcement came after the party slumped to 11 per cent support in the polls, prompting widespread discontent among MPs.

Sir Menzies had insisted he would stay on until after the next general election - even after Gordon Brown ruled out a snap election.

But the prime minister's decision is behind Sir Menzies departure.

"It has become clear that following the Prime Minister's decision not to hold an election, questions about leadership are getting in the way of further progress by the party," he said in his statement.

The prime minister was one of the first to comment on Sir Menzies's departure, describing him as "a man of great stature and integrity".

Deputy leader Vince Cable - who takes over in the interim - had admitted today that Sir Menzies's position was "under discussion".

At lunchtime he told the BBC's World At One that it was "very likely" Sir Menzies would want to stay - within hours Sir Menzies had decided to quit.

Tonight Mr Cable said the outgoing leader had "earned the respect, affection and gratitude of the party".

"This was reflected in the warmth with which his speech was received by the party conference three weeks ago."

The leadership debate was fired during the conference in Brighton when Nick Clegg declared that he was in the race to succeed Sir Menzies.

The home affairs spokesman insisted he was not plotting to oust Sir Menzies. But he said he would be a contender "if there was a vacancy in the future".

Asked at a fringe meeting to state his intentions, Mr Clegg replied: "if you are asking me would I stand against Ming, the answer is no."

Former Liberal Party Leader Lord (David) Steel told BBC News 24: "It's greatly to his credit that he has decided at this point to stand down."

But he questioned the way his predecessor Charles Kennedy was bounced out of office. "I do think that was badly handled.

"I think that if at that time, Ming had stood in as acting leader for six months to let Charles go away and recover, that would have been the right course."

Arrangements to elect a successor will be announced tomorrow and contenders are expected to wait until then before throwing their hat into the ring.