UK's Brown faces leadership challenge after Labour's thumping by-election defeat

The latest defeat may be a "death knell" to the Labour Party, which slumped to its worst municipal poll defeat in more than 40 years, losing a massive 331 council seats earlier this month.

Brown, who many claim is on his way out, has put up a brave front, saying he was still confident of winning the next general election.

"The message we are getting is people are concerned. They are concerned about food prices, concerned about petrol prices and concerned about what is happening to the economy," he said. "The message of the British public is clear and unequivocal: they want us to address these challenges."

"We are unequivocal and clear in our direction but we're going to address and are addressing these problems," Brown said.

"We will continue to do so and my task is to steer the British economy through what have been very difficult times in every country of the world and that I will continue to do," he said.

However, the Conservatives feel that the result mark the "end of New Labour."

Conservative leader David Cameron has hailed the Crewe and Nantwich by-election win a "remarkable victory" and said it marked the "end of New Labour."

However, "there won't be one hint of triumphalism or one hint of complacency" from them, Cameron said.

"We don't want to win just because Labour is failing. We don't want to win just because the Prime Minister is failing. We want to win because we have the right ideas for Britain's future," he said.

Sniffing a return to power at the next general election, Cameron said he would put together a "broad coalition" to defeat the Labour Party.

"Just like in the local elections, just like in the London mayoralty election, thousands of people came to vote for the Conservative Party for the first time and my message to those people is 'We will not let you down'," Cameron said, following news of Labour's defeat.

"What I want to show over the coming months, and whenever the general election is, is that that trust is right and that we will not let those people down. I want to build over the coming months, over the coming years, the biggest coalition for change in our country so that we really can change the country, we really can remove this government and give Britain a better chance," the opposition leader said.

"I want to go on building this broad coalition for change so we can bring our country better government," he said, calling the Labour government "backward-looking and divisive."

Meanwhile, calls for Brown to step down is getting louder even as he faces increasing leadership challenge.

Many Labour MPs feel last week's Crewe and Nantwich by-election defeat reflects that the party's popularity has slumped to record lows and it is time to think about "fresh leadership" if the Labour Party is to harbour any hope of winning the general election.

The by-election was called after the death of veteran Labour MP Gwyneth Dunwoody and her daughter Tamsin was soundly beaten by Conservative candidate Edward Timpson.

Those tipped to give Brown a run for his money are Foreign Secretary David Miliband, Justice Secretary Jack Straw and Transport Secretary James Purnell. Though none of them are going to publicly challenge Brown's leadership, their supporters will be making it clear to everyone that there is an alternative to Brown.

Senior party leaders are also urging Brown to appoint a deputy prime minister, a position Brown scrapped after he succeeded Tony Blair. The position, the Labour leaders feel, will boost Brown's flagging appeal and allow a smooth leadership transition in case Brown leaves office.

Many feel that the abolition of a 10 percent tax band, which hit low earners, along with price hikes for petrol, food and electricity have led to the Labour's election rout.

"The electorate is about to start divorce proceedings against us and we have to do something about that," said Labour MP Graham Stringer of Manchester Blackley, one of the first Labour MPs to call on Brown to go.

"If we lose our core vote we're in real trouble," he said, adding the party must "do what is necessary" to ensure it stays in power when the nation goes to vote in 2010.

"Is it more damaging for the party to change the leader or cross our fingers and hope that things get better?" Stringer said, adding a senior Labour leader should launch a leadership bid to save the party from "disaster."

Health Minister Ivan Lewis said the Crewe & Nantwich win for the Conservatives which overturned a 7,000 Labour majority to win with their own majority of nearly 8,000, could mark the "beginning of the end" for Labour.

Former Foreign Secretary Margaret Beckett said Brown must learn from the electorate's "clear desire to see a change of course" and respond to the criticisms levelled against him to restore the confidence of the voters.

According to former Minister of Environment, Agri-environment Food & rural Affairs, Michael Meacher who challenged Brown when Tony Blair stepped down, "the writing is on the wall" and Brown has a "last chance...to indicate a major change in direction" of his government.

"I believe he (Brown) can do that. I think he will find it difficult, but I think he is the right man to do it at this point. If he can't do it or won't do it, then he needs to give way to someone who will do it, because I don't believe with this current direction of Government policy that we can win," Meacher said, adding, "the policies which have been pursued have not sufficiently represented those that the Labour Party has always represented."

According to Labour MP John McDonnell of Hayes and Harlington, who challenged Brown for the leadership last year, the lesson learnt from the latest defeat is one thing: "Change or bust."

"Things are just going from bad to worse for the Government. It would be an immense misreading of the situation for New Labour ministers to dismiss this result as simply mid-term blues," McDonnell said.

"The Prime Minister's re-launch after the disaster of the local election results has proved to be totally ineffective. This result demonstrates the overwhelming anger and contempt in which New Labour is now held by our traditional supporters," he added.

Labour peers like Meghnad Desai and Swraj Paul have also suggested Brown to take firm steps like reshuffling the cabinet and show a "changed, improved" image, failing which he should "move over" for the sake of the party.

"I know he has difficulty changing his style, he's set in his ways, but we can recover because, policy-wise, Gordon Brown still has good ideas," Desai said. However, Desai added that unless the Labour Party saw a "changed improved Gordon Brown," the party would soon expect "somebody...to say, 'Please for the sake of the party that you love, move over.'"

However, the Labour Party is putting up a brave front, rallying around their embattled prime minister and saying there is no challenge to Brown's leadership right now.

While Health Secretary Alan Johnson has insisted there was "absolutely no appetite...to change the leader," former Deputy Prime Minister John Prescott has dismissed the leadership speculation as "utter nonsense" saying Brown was the "one man in our whole system" who could solve Britain's problems.

Foreign Secretary David Miliband, who is said to be in the running for the top post, said Brown is "the best man for the job."

Home Office Minister Tony McNulty has also urged Labour Party leaders to support their prime minister. "The vultures should clear off because there is no corpse around," he said.

Labour MP Austin Mitchell of Grimsby feel that there is point in challenging Brown but now he must listen to others. "We've never actually listened and, to be fair, Gordon hasn't listened to us," Mitchell said.

"Well, now we've got to listen and we've got to find out what's wrong and do something about it," he said.

According to Schools Secretary Ed Balls, "These are difficult times, times when you need strong leadership, values and experience."

"Gordon Brown has the right values and experience as a leader but it is not going to be turned around in a week," he said.

Though there were "discordant voices" within the party, it does not mean Brown will be stepping down or the Conservatives are certain of winning the next general election, deputy Labour leader Harriet Harman said.

"I don't think that will happen," she said. "The overwhelming majority of people in the Labour Party - and I speak to constituency chairs up and down the country in my capacity as deputy leader - are solidly behind Gordon Brown and what he stands for, which is a strong economy and fair society. He is the man with the experience to make sure that happens."

According to Labour MP Phyllis Starkey "an internal party dispute" is not going to increase their chances of winning the election.

"We need to be concentrating on the job at hand," he said.

However, Brown's time may be up as the local papers, which were earlier sympathetic towards him after the council defeat, were about to write him off this time.

While the Financial Times said the public had turned against Brown who is unlikely to "recover," the Independent said Brown's handling of problems "followed a pattern of denial, adjustment and abstract language that has failed to reassure.

"It is difficult to see how Mr. Brown can find a way out of the hole he has dug for himself," the Independent said.

"The sense of drift and incompetence must cease," said The Daily Mirror, a paper that has consistently backed the Labour Party. "Mr. Brown and his senior lieutenants must do something positive every day for the next two years."

While the left-leaning Guardian was scathing in its attack, saying the Labour "has begun to look like the stupid party" and David Cameron "looked like Britain's next prime minister," the down-market Daily Star listed options for Brown's next job, including "charisma bypass surgeon," an undertaker, or a return to being a "football programme seller."