Paul Murphy said Labour needed to 'listen hard and act hard'
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The Welsh Secretary Paul Murphy said the Labour party had been given a "kick up the backside" in the local council elections.
The party lost control of six councils in Wales in Thursday's poll.
The Torfaen MP said it had been a "terrible night for Labour in Wales and rest of country" and the party needed to listen carefully on core issues.
"I think people have given us a message which was very stark," he told BBC Wales' Politics Show.
"They want us to understand worries about fuel prices, food prices, the 10p rate of tax, and generally the pinch they're feeling - it was a kick up the backside, we have to acknowledge that and have to do something about it."
"We have to address those concerns and they have to be dealt with very quickly...we have to accept at the moment people are uncomfortable about their financial position at home, recognise that and do something about it."
Mr Murphy denied Labour had become complacent, but said the election results were "a wake up call to address the issues".
"We talk a lot about constitutional issues, these things have to take second place to the realities of everyday living," he added
He said people felt unfairly treated when they saw oil company and supermarket profits and that the 10p tax issue, mortgage costs and prices were felt more acutely in Wales.
Mr Murphy said people had voted for anti-Labour candidates in traditional seats but the party could come back.
"We have to listen hard and act hard."
Meanwhile, Welsh Liberal Democrat leader Mike German said his party was "force to reckoned with" in Cardiff, Swansea and Newport.
"We've broken the back of some of the worst Labour councils in Wales," he said.
Labour has a majority in just two councils in Wales
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Jonathan Morgan AM, for the Conservatives, said it was a very good result for his party, with an extra 66 seats.
"We're now the largest party in the Vale of Glamorgan, Monmouthshire, Denbighshire and Flintshire...where the resources were targeted, we made significant improvements in the number of councillors."
He said they ran a "positive, active campaign", which picked up votes in other areas.
Plaid Cymru acknowledged disappointment in Gwynedd but said the "the overall picture was a vote of confidence."
It said it was also breaking new ground in areas such as Wrexham and Torfaen.
Party chair John Dixon said in councils where there is no overall control, the challenge was to secure stable government.
He said: "Plaid will always put the interests of our communities first and we will approach the post-election talks with that in mind."
Earlier, Labour MP for Islwyn Don Touhig also said Labour had to learn lessons.
After the 1999 elections, Labour ran nine Welsh councils, but it now has a majority in just two - Neath Port Talbot and Rhondda Cynon Taf.
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