Gordon Brown’s chances of survival were dealt a severe blow last night after the Work and Pensions Secretary James Purnell dramatically announced his resignation from the cabinet and called on Brown to stand down as Labour leader.

In his resignation letter, Purnell said that Brown needed to step down “to give our Party a fighting chance of winning”. He warned that Brown’s leadership “makes a Conservative victory more, not less likely”.

He denied that he was seeking the leadership himself and made no reference to any potential successor.

“I am not seeking the leadership, nor acting with anyone else. My actions are my own considered view, nothing more. If the consensus is that you should continue, then I will support the government loyally from the backbenches. But I do believe that this question now needs to be put.”

His resignation won public support from several backbenchers including Graham Allen, Barry Sheerman and Siobhain McDonagh. Allen said that most Labour MPs now wanted Brown to resign and called for a swift and decisive leadership contest, while McDonagh, one of the MPs who sought to oust Brown last summer, praised Purnell’s decision as “incredibly brave”.

“He’s given up his Cabinet career because of something he believes in and I think that's fantastic. I think it's to be applauded,” she said.

Purnell called the Prime Minister to inform him of his decision shortly after polls closed in the local and European elections. Number 10, which had not been expecting his resignation, was outraged by the move.

A spokesman for Purnell said: “He feels Gordon should now stand aside to give the party a fighting chance of winning the next election. He is not seeking the leadership nor acting with anyone else. This is not about jobs or careers.”

He added: “He has made the decision in the last few weeks – he's always been very loyal, but he now feels he can no longer go out and defend the Prime Minister. That is why he has taken the difficult decision to resign.”

Purnell was believed to have been offered the post of Children’s Secretary, currently held by Ed Balls, intensifying speculation that Brown is planning to appoint Balls as Chancellor.

David Cameron said the government was now “falling apart in front of our eyes” and renewed his call for an immediate general election.

“In a deep recession and political crisis we need a strong Government. Instead we have a Government falling apart in front of our eyes. Britain deserves better than this,'” he said.

“With this resignation the argument for a general election has gone from being strong and powerful to completely unanswerable.”

Purnell’s resignation marks a new phase in the Labour leadership crisis; though two other cabinet ministers, Hazel Blears and Jacqui Smith, had already resigned, neither explicitly called for Brown to quit.

Following Purnell’s announcement, ministers took to the airwaves to defend Brown in a massive damage limitation exercise.

Liam Byrne, the Cabinet Office minister, and traditionally a close ally of Purnell’s, said that Purnell had “profoundly read the wrong signals from this election campaign.” He warned that a leadership contest would be seen as self-indulgent by the public.

Caroline Flint, a close friend of Blears’s who was expected to leave the Cabinet shortly, issued a supportive statement. “I am staying in the government. I am very proud to be part of Gordon Brown’s government,” she said.

Blairite ministers including John Hutton and Andy Burnham also rallied behind the Prime Minister.

There was speculation last night that David Miliband would resign from the cabinet today but a source close to the Foreign Secretary rejected this and said Miliband did not agree with Purnell’s decision.

The Health Secretary, Alan Johnson, who is widely seen as the frontrunner to succeed Brown, made no comment on Purnell’s departure.

Brown’s future will now depend on his ability to carry out a major cabinet reshuffle, likely to be held today, and on the extent of Labour’s losses in the local and European elections.