Page last updated at 17:34 GMT, Tuesday, 11 May 2010 18:34 UK

Hung parliament: Labour 'close to conceding defeat'

David Cameron: ''It is now.. decision time for the Liberal Democrats''

A close ally of Gordon Brown has suggested to the BBC that Labour are close to conceding defeat in their efforts to do a deal to stay in power.

The BBC's Nick Robinson said he was told the Lib Dems had decided to back the Tories and Labour would regroup as the only "progressive" party.

It would clear the way for a Lib Dem and Tory deal which would see David Cameron becoming prime minister.

Mr Brown is understood to have spoken by phone to former PM Tony Blair.

He is in his office with his wife Sarah and close allies Lord Mandelson, Ed Miliband, Ed Balls, Douglas Alexander, Alastair Campbell and Sue Nye.

But a Downing Street source said Mr Brown would not announce his resignation until there was an announcement of any deal between Nick Clegg and Mr Cameron.

The Lib Dem and Conservative teams are still in talks at the Cabinet Office - four days after the UK general election resulted in a hung parliament.

Mr Cameron, Conservative leader, met Lib Dem leader Nick Clegg in private for an hour earlier on Tuesday.

'Deliverability problems'

The BBC's political editor said a senior Lib Dem source had told him that talks with Labour had been "amicable but problems remain on deliverability and Labour cohesion" while Labour sources said the Lib Dems had unaffordable tax and spending commitments.

Conservative MPs are due to meet at 2000 BST. Lib Dem MPs, peers and the party's ruling body, the federal executive, are to meet at 2030 BST, Mr Clegg must secure a majority of support from both groups before pressing ahead with any deal.

I hope they will make the right decision to give this country the strong, stable government that it badly needs and badly needs quickly
David Cameron

Talks between Labour and the Lib Dems began formally on Monday when Mr Brown announced he would be stepping down as Labour leader.

But several senior Labour figures have since warned against a coalition with the Lib Dems, particularly if the price involves offering them a referendum on changing the voting system to proportional representation.

Cabinet minister Andy Burnham told the BBC that Labour had to "respect the results of the general election and we can't get away from the fact that Labour didn't win". An aide said he was merely voicing concerns among colleagues.

BBC business editor Robert Peston said he had learned elements of the likely joint Tory-Lib Dem economic and business policy.

'Good discussions'

He said the Tory commitment to cut spending by £6bn this year would stand unless there was a big financial deterioration - while the Tories would adopt the Lib Dem plan to raise the tax-free allowance on income tax to £10,000. He also said any big increase in the inheritance tax threshold would not happen while the Lib Dems were part of the government.

Entering the Tory-Lib Dem talks on Tuesday afternoon, senior Conservative William Hague said they felt "very strongly that there should be a government with a strong and secure majority in the House of Commons and an elected prime minister" and had "come here to hear the Liberal Democrat response".

Labour's Ed Miliband said they had had "good discussions" with the Lib Dems earlier.

But some Labour figures - including David Blunkett and John Reid - have warned against a deal.

Lib Dem leader Mr Clegg said talks had reached a "critical and final phase" and his party would "do our bit to create a stable, good government".

BROWN TO STAND DOWN
Gordon Brown

Both Labour and the Tories have been trying to woo the Lib Dems with promises on electoral reform to help them form a government, after the Conservatives won the most seats in Thursday's election but fell short of an overall majority.

Labour say if the Lib Dems back them they will put the Alternative Vote system into law and then hold a referendum asking voters if they want a proportional representation voting system - a key issue for the Lib Dems.

Under AV, voters rank candidates in a constituency. If no-one gets 50% of votes the candidate finishing last gets eliminated and their second preferences are awarded to the remaining candidates. This continues until one candidate passes the 50% mark.

The Conservatives upped their offer to the Lib Dems to a promise of a referendum on changing the voting system from existing first past the post system to AV.

'Decision time'

Speaking on Tuesday morning Mr Cameron said his party had made a "very reasonable" offer to the Lib Dems and had put aside party interest in favour of the national interest - the Conservatives oppose changing the voting system.

Mr Cameron said: "It's now, I believe, decision time, decision time for the Liberal Democrats and I hope they will make the right decision to give this country the strong, stable government that it badly needs and badly needs quickly."

Nick Clegg: Talks in critical and final phase

But former Conservative cabinet minister Sir Malcolm Rifkind told the BBC he was "very angry" as he had believed Mr Clegg was "acting in a very honourable way" before learning his team had been secretly meeting Labour.

Meanwhile David Miliband refused to be drawn on the progress of talks between the Lib Dems and Labour - but appeared to confirm he would stand to succeed Mr Brown as Labour leader, saying: "I'm certainly not going to be saying anything more - and none of the candidates are going to be saying anything more."

Senior Lib Dem and Labour figures have appeared to rule out a "rainbow coalition" involving the SNP and have said instead they could rule as a minority government, confident that the Scottish nationalists would not vote with the Conservatives.

Coalition scenarios



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