Britain was last night plunged into uncertainty over its future government, as both Labour and the Conservatives competed for the support of the Liberal Democrats to form an administration.

Nick Clegg yesterday held talks with David Cameron on the Tory leader’s “big, open and comprehensive offer” to Lib Dems, which could see the third party provide ministers in a coalition Cabinet.

Liberal Democrat sources last night said the two men had agreed they should “explore further” plans for economic and political reform.

But Gordon Brown – who remains Prime Minister until the resolution of the impasse caused by yesterday’s inconclusive General Election – made clear that he was ready to deliver immediate legislation for a referendum on the Lib Dems’ cherished goal of electoral reform if Mr Clegg signs up to a deal to keep him in Downing Street.

A dramatic day of offer and counter-offer was set in train by an election which produced the UK’s first hung Parliament since 1974.

With a single seat left to declare, Conservatives had secured 306 MPs in the new House of Commons – an increase of 97 in their parliamentary representation, but 20 short of the 326 threshold for an outright majority. Labour were on 258, after losing 91 seats, and Liberal Democrats were down five on 57.

Labour has been wiped off the parliamentary map of East Anglia – there are now no Labour MPs east of the M1.

The Conservatives won Ipswich, Waveney, and Great Yarmouth and retained the Norwich North seat they won in a sensational by-election last year.

The Liberal Democrats unseated former Home Secretary Charles Clarke in his Norwich South seat to increase their numbers in the region to four.

Despite admitting “disappointment” at his party’s failure to translate the surge of support it enjoyed after the televised leaders’ debates into votes and seats, Mr Clegg was thrust into the role of kingmaker.

He put the ball firmly in Mr Cameron’s court by declaring that, as the party with most seats and votes, the Conservatives had the “first right” to seek to form a government. He challenged them to show themselves “capable of seeking to govern in the national interest”.

But he was subjected to determined wooing from Labour, with first senior ministers like Lord Mandelson and Peter Hain making clear the party’s readiness to offer a deal on electoral reform, and then Mr Brown himself making a direct overture.

In a statement outside 10 Downing Street, Mr Brown committed himself to immediate legislation for a referendum on a “fairer voting system” –with the public to decide what that system should be.

Less than an hour later, Mr Cameron made his own offer, including an all-party committee of inquiry on political and electoral reform to look at the possibility of changing Westminster’s first-past-the-post voting system.

Mr Cameron said he was ready to head a minority Conservative administration on a “confidence and supply” agreement, under which smaller parties committed themselves not to bring the government down in return for assurances on key policy areas.

But he made clear he would prefer a “stronger, more stable, more collaborative” arrangement which would enable the country to have a settled government at a time of grave economic difficulties.

The Tory leader signalled his readiness to drive through Lib Dem priorities, including scrapping ID cards, promoting green industries and helping poorer schoolchildren, and to work together on a version of Mr Clegg’s flagship policy of taking earnings under �10,000 out of income tax.

But he assured Tory activists he would give no ground on Europe, the Trident nuclear deterrent, immigration or the need to start paying down Britain’s record �163 billion deficit this year.

Shadow foreign secretary William Hague - Mr Cameron’s effective deputy – made clear that the Tory leader was ready to consider anything from an informal agreement on co-operation to a fully-fledged coalition with places at the Cabinet table for Liberal Democrat

Mr Cameron’s own offer led to telephone talks between Mr Cameron and Mr Clegg, understood to have lasted about 10 minutes, after which a Lib Dem spokesman said: “They agreed that they should explore further proposals for a programme of economic and political reform.”

Lib Dem energy spokesman Simon Hughes last night questioned whether Mr Cameron could actually deliver on electoral reform and warned that his offer of a committee of inquiry would not be enough.

“Whether he can carry his shadow cabinet with him, whether he can carry his colleagues with him, remains to be seen. There are some very die-hard people in the Tory Party,” he told Channel 4 News.

Asked if the Lib Dems would require more than an offer of a committee of inquiry on electoral reform, he replied: “That would be my presumption.”

Mr Clegg last night arrived for talks at his party’s headquarters at Westminster, while Mr Hague and Mr Osborne emerged from a meeting at the Cabinet Office.