Senior British Labour Party figures tonight rallied round Mr Tony Blair to insist his position was secure as the party crashed to third place in the local council elections.
After a night of big gains for the Conservative Party, jubilant leader Mr Michael Howard claimed that they had opened up a sufficient gap from Labour to win the next general election.
Mr Blair admitted the decision to go to war with the United States in Iraq had taken its toll. Speaking in Washington after attending fprmer US president Mr Ronald Reagan's funeral, Mr Blair said: "I think it's a question of holding our nerve and seeing it through - and realising that yes Iraq has been an immensely difficult decision.
"In respect of the basic performance of the government, I think our response should be to make sure we carry through and implement the radical programme we have in introduced."
"The fact that the government loses council election results doesn't really augur much for the General Election. I think there are lessons, lessons we have got to learn."
He predicted that over "the coming period of time" Iraq would be "in a better and different place" and people would realise the benefits of the government's record on the economy and public services."
Labour insisted that the Tory advances fell short of the breakthrough needed if they were to stand a chance of taking power at Westminster.
However senior figures admitted openly that they had taken a "kicking" from the electorate, as voters took out their unhappiness with the government over the war in Iraq.
With more than three-quarters of the results in, Labour had lost more than 400 seats with a net loss of control in six councils - including the big city prizes of Newcastle and Leeds.
The Conservatives had gained more than 200 seats while the Liberal Democrats were also up by more than 100.
A BBC projection said that the figures equated to a 38 per cent share of the popular vote, followed by the Liberal Democrats on 30 per cent with Labour trailing in third place on 26 per cent.
It is thought to be the first time that the governing party has been forced into third place in such a test of public opinion.
Cabinet heavyweights Mr David Blunkett and Mr Jack Straw were wheeled out to scotch speculation about Mr Blair's future, insisting that his position was not under threat.
While they made no attempt to deny that it had been a bad night for the party, they said that they could still bounce back in the general election to secure a historic third term.
"The Prime Minister's position is very secure and very well recognised around the country," Mr Straw said.
Mr Blunkett said he was "mortified" that the party had done so badly, but said that the Conservatives would have to do better if they were to regain power at Westminster.
"A bad night for us, but not meltdown. No take-off for the Conservatives. They haven't even got the undercarriage down, never mind managed to actually get across the Atlantic or - dare I say it - the English Channel."
Deputy Prime Minister John Prescott said the war in Iraq was a crucial factor, but he insisted the general election would be fought on the battleground of public services.
"They didn't judge this election on that. Iraq was a cloud, or indeed a shadow, over these elections. I am not saying we haven't had a kicking. It's not a great day for Labour," he said.
Mr Howard said the results - which saw the Tories gain control of 11 more councils - gave them an ideal platform for the next general election.
"We have to be 11.5 points ahead to win the general election. On last night's results, we were 12 points ahead," he said.
Speaking on the steps of party HQ in central London, he said the Liberal Democrats' predicted second place was "a dramatic advance" and "augurs very well indeed" for a general election.
"It is an encouraging omen," he said.