In a shock announcement, Gordon Brown offered to oversee talks between the two parties before stepping down by the time of the Labour conference in September 2010, when a new prime minister would be chosen by party members.

The prime ministers news conference upped the ante in talks between the Conservatives, who won the most seats in Thursday's election but not a majority in Parliament, and the Liberal Democrats, whose third-place finish still leaves them kingmakers.

The Tories immediately announced they would offer the Liberal Democrats a referendum on electoral reform — their key demand in the talks — in a last-ditch bid to secure their loyalty. The Conservatives have been reluctant to accept such reform because they fear it would freeze them out of power.

In a day of high drama at Westminster after it first appeared that the Liberal Democrats were close to agreement with the Tories about a power-sharing deal, Mr Brown said his aim was to ensure a "stable, strong and principled government" was formed.