Gordon Brown is to step down as Labour leader by September - as his party opens formal talks with the Lib Dems about forming a government.
His announcement came as he and the Conservatives woo the Lib Dems in a battle to run the country.
Mr Brown's presence was seen as harming Labour's chances of Lib Dem backing.
The Tories reacted by making a "final offer" to the Lib Dems of a referendum on changing the voting method to the Alternative Vote system.
Conservative sources have told the BBC that on Monday morning the Conservative and Liberal Democrat teams were discussing a stripped-down deal in which the Lib Dems would not topple the Tories in a confidence vote.
'Progressive majority'
It is now understood the Lib Dems are seeking a full coalition with either Labour or the Conservatives. Liberal Democrat MPs are to meet at 2200BST to discuss the party's next move. There are no plans at the moment for Tory negotiators to resume their talks with the Lib Dems, the BBC understands.
