In Wales meanwhile, a historic political heartland for Labour, the party lost three assembly seats and will need to seek a coalition partner to govern effectively.
But it is north of the border that the party suffered its most telling defeat, with the Scottish National party (SNP) overtaking it at Holyrood with 47 seats compared to Labour's 46.
SNP leader Alex Salmond will now petition the Liberal Democrats and the two Green MSPs to reach the overall majority of 65 needed to become Scotland's first minister.
The SNP's apparent ascendancy in Scotland is a headache for incoming prime minister Gordon Brown, who is widely expected to become the next Labour leader when Tony Blair steps down in the coming weeks.
But speaking from his Fife constituency yesterday, the chancellor claimed yesterday's results showed Labour had "fought back" in his native Scotland.
"The vast majority of those who have voted have voted for a Scotland that maintains its rightful place in Britain," he said.
"To all those who came back to Labour – and to everyone throughout Britain – my resolve is that we, the Labour party, will listen and learn as we continue to work for and serve the people of Britain."
After a good day at the polls Mr Cameron meanwhile claimed that his Tories had become the "party of the whole country".
However, Labour still remains by far the dominant party in northern English councils, with neither Manchester, Liverpool or Leeds home to a single Conservative councillor.
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