Blunkett says Labour has lost the election

But he warned that he believes it is "quite likely" the Conservatives will win an overall majority.

Mr Blunkett told BBC News: "My instinct is that regrettably we have lost the election. We should now go for uniting the anti-Conservative forces, if we are in a position, in a way that minimises the damage they can do to the economy, social policy and the wellbeing of the people who voted for us in the election yesterday."

He added it is for Gordon Brown to decide whether to forge an alliance with other parties to hold on to power.

"Only the Prime Minister can concede defeat or decide that he would like to try to reach a deal with others. That's entirely dependent on whether the Conservatives get an overall majority.

"My own view at this very early stage is that it is quite likely the Conservatives will make it or be so close to it that the decision will be made."

Business Secretary Lord Mandelson told BBC News: "Of course, many people have turned away from the Labour Party but what they haven't done is to fly into the arms of David Cameron's Tories."

Asked if Labour would do a deal to stay in power, he told BBC News: "The constitutional conventions are very clear.

"The rules are that if it's a hung parliament, it's not the party with the largest number of seats that has first go - it's the sitting government."

Pressed again on whether he would do a deal with the Lib Dems to hold on to power, he said: "I have no problem in principle in trying to supply this country with a strong and stable government."

Labour's deputy leader, Harriet Harman, told BBC News: "What is clear is that the country is going to need a strong and stable government to take us through the recession.

"And the country hasn't turned overwhelmingly to the Conservatives and given them the trust and confidence ... predicted a year or so ago."

She told ITV it was "disappointing" for Labour to lose Battersea but the overall picture remained unclear.

"Until all the votes are counted, until all the results declared, we don't know what the situation is - except that the constitutional position is that the Prime Minister remains the Prime Minister until somebody else has an overall majority.

"And if there isn't another party with an overall majority, then the responsibility remains firmly on the shoulders of the Prime Minister to see whether or not he can form a majority government."

Home Secretary Alan Johnson admitted the Tories "seemed to have done very well" but he stressed the parties would have to look at the "will of the British people" before forming any coalition.

Mr Johnson told Sky News: "I've got no problem with deals and coalitions and all the rest of it. But it has to be in the right circumstances."

He told BBC News: "If the will of the people is that no party has an overall majority, that's where grown-up, mature politicians have to be.

"I can't see the Lib Dems forming a deal with the Conservatives. I certainly can't see us forming a deal with Conservatives."

Mr Johnson said that on the central issues of securing the economy and electoral reform, Labour had "much in common" with the Lib Dems.

"I think we have a lot in common and we could come together on this. Let's see what the outcome is."

Labour's election co-ordinator, Douglas Alexander, said: "It will be for us to decide - along with every other party - what is the best way forward as these results play themselves out."

Labour's Energy and Climate Change Secretary Ed Miliband told BBC News: "We need a stable government, we have to see who can form a stable government.

"The Prime Minister gets to have the first crack at that."

Scotland Secretary Jim Murphy told ITV News: "I think all options are still open, including for example a Labour-Liberal coalition."

Former Lib Dem leader Lord Ashdown said politicians should wait until next week to "make more sensible decisions" if a hung parliament is delivered.

He also told ITV News the Tories would "try to play the trick of Milosevic of turning an election into a street battle".

He said: "What you have got here is an uncertain result - a rather poor result for Mr Cameron - but the phrase 'a comprehensive rejection of Labour' is the phrase you are going to hear."

But Tory former Cabinet minister Ann Widdecombe said Lord Ashdown was being a "bit pompous and premature", adding: "Not only is this a comprehensive rejection of Labour, but it is the nation actually saying they do not want Labour to govern.

"Now if the Liberal Democrats decide that they are going to prop up a discredited government, well, I think they will pay the price in about six months' time."

Shadow work and pensions secretary Theresa May said it would be "absolutely extraordinary" if Labour tried to cling on to power after what could be its "worst result since 1931".

Shadow business secretary Ken Clarke told ITV News: "One thing is clear: Gordon Brown can't possibly carry on as Prime Minister.

"He has lost all authority to govern."

Tory former Cabinet minister Michael Portillo said the Tories appeared to be "some distance short" of an overall majority, adding that with the economic problems facing the country "even a small majority is not the comfortable place you would like to be".

He told BBC News the markets would feel "more assured if the new prime minister had an overall majority".

A Conservative Party spokesman said Arnold Schwarzenegger had phoned Conservative leader David Cameron to congratulate him on victory.

The governor of California posted on the micro blogging site Twitter: "Just called @davidcameron to congratulate him on the victory. Even though results aren't in we know the Conservatives had a great day."

Mr Osborne told ITV News: "I think Labour politicians like David Miliband need to, to coin a phrase, get real.

"The election has taken place and on the basis of the exit poll the Labour Party has been decisively rejected."

He went on: "The idea that Gordon Brown, David Miliband and the rest of them could cling on to power I think most people would find simply staggering."

Asked why the Conservatives had not done better than the exit poll suggested, Mr Clarke said it was "a particularly difficult election" because people were angry and "anti-Westminster".

He told Sky News: "On the figures I have seen so far David Cameron has obviously won. He's preferred above all others in what has been a rather presidential campaign.

"Gordon Brown has lost."

Mr Clarke added: "The key thing is to produce a strong stable government."

He said a hung parliament did not mean electoral reform was needed, adding that no member of the public had raised this issue with him during the campaign, only journalists and activists.

"The next parliament, the next government, has got to get faith back," he said.

Mr Osborne told ITV News: "I think Labour politicians like David Miliband need to, to coin a phrase, get real.

"The election has taken place and on the basis of the exit poll the Labour Party has been decisively rejected."

He went on: "The idea that Gordon Brown, David Miliband and the rest of them could cling on to power I think most people would find simply staggering."

Asked why the Conservatives had not done better than the exit poll suggested, Mr Clarke said it was "a particularly difficult election" because people were angry and "anti-Westminster".

He told Sky News: "On the figures I have seen so far David Cameron has obviously won. He's preferred above all others in what has been a rather presidential campaign.

"Gordon Brown has lost."

Mr Clarke added: "The key thing is to produce a strong stable government."

He said a hung parliament did not mean electoral reform was needed, adding that no member of the public had raised this issue with him during the campaign, only journalists and activists.

"The next parliament, the next government, has got to get faith back," he said.

Mr Miliband, widely tipped as a challenger to Gordon Brown in the event a heavy Labour defeat, resisted speculation about this possibility, insisting: "We have a strong leader of our party.

"We have a strong team of which I'm privileged to be a part."

Mr Miliband said Mr Brown had "really found his voice, especially towards the end of the campaign".

Mr Clarke told BBC News that it was a "certainty" that Gordon Brown would be removed from office.

He said: "It looks as though there is a serious risk of a hung parliament but with the Conservatives not too far off and obviously the single biggest party.

"One certainty, I think, is that Gordon Brown has been removed from office. It would be a complete travesty if Gordon Brown tried to carry on as Prime Minister because he has plainly been rejected and lost all authority to govern."

Lord Mandelson told Sky News the Labour Party was "obviously" prepared to consider a deal with the Liberal Democrats in order to keep the Conservatives out of power.

Asked if he would ensure Labour ditched Mr Brown as leader if that was the price of a coalition, Lord Mandelson said: "They'd have to express that view in the first place and they haven't."

Energy and Climate Change Secretary Ed Miliband said a Labour/Liberal Democrat coalition was a "possibility" as polls continued to suggest a hung parliament.

"I think at the end of this, we need stable government," he told Sky News.

Asked about the possibility of Labour and Liberal Democrats working together, he answered: "Clearly, that's one possibility. Those discussions would have to take place between Gordon Brown and Nick Clegg."

Environment Secretary Hilary Benn said he was concerned that people had been unable to vote and welcomed the Electoral Commission's investigation.

"One of the stories of the night is the number of people who have come out and voted," he told Sky News.

"Turnout is up. I think that shows that our democracy is in good heart because, despite the difficulties of the last few months, people have understood what's at stake in this election."

He added: "If we do end up with a parliament where no party has got an overall majority we are going to have to work hard to make sure that that does work."

Mr Benn said Labour would have to work hard to restore trust in democracy "with others who are prepared to share our values".

"As far as Labour is concerned if there are others with whom we can work and that were possible to achieve a majority then that's something that we should be prepared to contemplate.

"We should be looking to do what we can to protect people from a Conservative government."

Miss Widdecombe told ITV some of the swings to the Conservatives were "staggering".

"You do get wild swings in by-elections but in a General Election context, for swing after swing after swing to come in in excess of 8%, sometimes 9%, 10% even 11% I think is very significant," she said.

Ms Harman said it was "disappointing" for Labour to lose Battersea but that it was "very early days".

"I think overall the picture is still unclear," Ms Harman added.

"Until all the votes are counted, until all the results declared, we don't know what the situation is - except that the constitutional position is that the Prime Minister remains the Prime Minister until somebody else has an overall majority.

"And if there isn't another party with an overall majority, then the responsibility remains firmly on the shoulders of the Prime Minister to see whether or not he can form a majority government."

Labour's David Blunkett, a former cabinet minister, said parties should work together to tackle the country's economic problems.

"If we have to, we should regroup, rethink and we should unite with those of good will to prevent this country going back into a recession," he told Sky News.