Gordon Brown 'Stepping Down as Labour Leader'

British acting Prime Minister Gordon Brown has announced he will step down as Labour leader by September - as his party opens formal talks with the Lib Dems about forming a government.

In his statement, Brown said Britain had a "parliamentary and not presidential system" and said there was a "progressive majority" of voters. He also said if the national interest could be best served by a coalition between the Libeeral Democrats and Labour he would "discharge that duty to form that government."

But he added that no party had won an overall majority in the UK general election and, as Labour leader, he had to accept that as a judgement on him.

"I therefore intend to ask the Labour Party to set in train the processes needed for its own leadership election. I would hope that it would be completed in time for the new leader to be in post by the time of the Labour Party conference. I will play no part in that contest, I will back no individual candidate."

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

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

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

Labour are offering to put the AV system into law and then hold a referendum asking voters to approve it. It is now understood the Liberal Democrats are seeking a full coalition with either Labour or the Conservatives.

A senior Liberal Democrat source indicated that he expected a resolution to the process of shaping the new government to be reached within the next 24 hours, saying that tomorrow was "crunch time."

A meeting of the party's MPs continued beyond midnight and ended with no firm decisions taken, according to BBC News.