The PM's continued presence in Downing Street was seen as harming Labour's chances of reaching a deal.

Labour and the Tories are both trying to woo the Lib Dems with promises on electoral reform as the battle to run the country reaches its critical phase.

No party won a Commons overall majority at the general election on May 6.

The Tories, who won the most seats and votes, reacted to Mr Brown's announcement that he was standing down as Labour leader by making a "final offer" to the Lib Dems of a referendum on changing the voting method to the Alternative Vote (AV) system.

Labour is offering to put the AV system into law and then hold a referendum asking voters to approve it.