Labour-Lib Dem coalition talks continue

Negotiations continue after Brown dramatically announces resignation as Labour leader.

Negotiating teams from Labour and the Liberal Democrats will meet again today following Gordon Brown's dramatic announcement that he will step down as party leader by September.

Brown made clear he was prepared to stay on as prime minister in a coalition government until a Labour successor had been chosen.

The Tories responded to his decision by making an extraordinary "final offer" to the Lib Dems: a referendum on changing the voting system to the Alternative Vote (AV) method and and a coalition government with seats for Nick Clegg's party in the cabinet.

Labour has offered to put the AV system into law and then hold a referendum on the single transferable vote, the proportional system favoured by the Lib Dems.

A senior Liberal Democrat source told the BBC that the process of forming a new government may be resolved in the next 24 hours. Senior MP Simon Hughes said he believed a deal should be possible today.

"We are keen to conclude them as soon as is practically possible, and I would imagine that should be possible - should be possible - during the rest of what is now Tuesday," he said.

He added: "There is a conversation with Labour to see if we can deal with Labour, that's a serious conversation in its own right. There is a conversation with the Tories to do a deal with the Tories, a serious conversation in its own right.

"Those are the only two conversations going on, and a deal would be with either of those. And they are both being pursued with equal vigour. There is no favoured deal."

The likely candidates for the Labour leadership agreed at a Cabinet meeting yesterday that they would not say whether they intended to run for the post until a new government had been formed.