Major: I can still win the next election

An unbowed John Major yesterday responded to the second worst defeat in local government history by declaring that he wanted the Government to run its full term to secure the general election victory which he insisted was still in his party's grasp.

Mr Major, convinced that the threat to his own leadership is now lifted, made it clear he wanted until next spring before calling the election, saying: "We have another year of this Parliament left. I went the whole five years in the last Parliament and I won." He added: "Let the people judge us on what we have done at the end of our term of office when we will lay before them all the things we have achieved."

As Tory strategists absorbed the shock of losing 567 council seats in every part of the country - and the depth of the electoral trough from which the party has to climb, Mr Major firmly blamed the "pain" inflicted by the "difficult economic decisions" he had taken for a rout which wiped his party out in 20 local authorities.

Mr Major insisted that the local results were no predictor of the general election outcome. "People have, for as far back as you can go since the Second World War, chosen by-elections and local council elections to protest against the government of the day," he said during a series of interviews.

Leading a bullish fightback which will continue in a barrage of TV interviews with senior Cabinet ministers over the weekend, the Prime Minister added: "There are millions and millions of people who will go out and vote Conservative at the next general election who chose not to do so yesterday."

There were signs last night that the Bank of England, backed by some treasury officials, was ready to resist any political pressure to reduce interest rates as a response to the battering that the Tories suffered in the local elections. It will fight any attempt by the Chancellor to repeat his spectacular success last year in cutting rates, despite the reluctance of the Bank's governor, Eddie George - although there were no immediate signs that Mr Clark intended to press for a rate cut when he meets Mr George next week.

Tony Blair said the results were "excellent for new Labour" and "spectacularly bad for the Conservatives" who were able only to "scratch around for the odd piece of statistical comfort".

He accused the defeated Tories of displaying the "complacency" and "arrogance" that Labour, despite the scale of its gains, had pointedly eschewed. "This was not a general election," he said, "and we take nothing whatever for granted." Labour could continue to work for "every piece of support".

The humiliating series of defeats saw Labour take control of the once Thatcherite bastion of Basildon, as well as Peterborough, the political base of Dr Brian Mawhinney, the Conservative Party chairman, and the typical shire district council of

Cherwell, which includes the country town of Banbury, with its cattle market, badly affected by the BSE crisis.

Instead of seeing the rival opposition parties compete for votes at each other's expense, Tories on many councils faced more of a pincer movement from tactical voting.

The result produced 11 Labour gains, leaving a record 210 councils under Labour control, and in 20 local authorities the remaining Conservative councillors were completely wiped out, leading Frank Dobson, Labour's local government spokesman, to dub them "Tory-free zones".

But as the only party to see its vote share increase since last year, the Liberal Democrats did especially well, gaining seven councils. They now control 55, including once traditional Tory heartlands such as Tunbridge Wells, Woking, Wokingham and Hastings.

They consolidated their position as the second party in local government, outstripping the Conservatives in numbers of councillors and the number of councils in their control. The Tories now control just 13 out of 400 local authorities in England and Wales.

The main consolation for the Conservatives was that Labour's lead in terms of the share of the vote fell from 21 per cent last year to 16 per cent on the BBC's analysis - underpinning the repeated warning of Mr Blair to his party not to be complacent.

Paddy Ashdown, the Liberal Democrat leader, said the results gave his party "the best general election launch pad we have ever had". He added: "We are winning where we need to win..."

Tory strategists now believe that the Government has a good chance of running its full term - but acknowledge that the biggest hurdle is likely to be the Queen's Speech next November, when it could be brought down in a Commons vote if the Ulster Unionists choose to withhold support in a confidence motion.