Britain now has three-party system, declares Kennedy

Charles Kennedy warned yesterday that "the tide is going out for Labour" after historic inroads were made into Tony Blair's urban heartlands, driving Labour into third place.

Charles Kennedy warned yesterday that "the tide is going out for Labour" after historic inroads were made into Tony Blair's urban heartlands, driving Labour into third place.

The Liberal Democrats annihilated Labour in Newcastle, a socialist stronghold held by Labour for 30 years. Capitalising on unease about the Iraq war, the Liberal Democrats also gained in Cardiff, Swansea and Liverpool, pushing Labour into third place overall.

Lord Rennard, the party's campaigns and strategy chief, said winning control of Newcastle was spectacular and had exceeded expectations. "What matters for us is momentum," he said. "This puts us in good stead to win extra parliamentary seats. Moving up is what we always want to do." The party gained more than 144 council seats but lost two councils.

The party also made surprise losses in their own strongholds, including Cheltenham, whose MP is Nigel Jones, and Winchester, the seat of Mark Oaten, the party's Home Affairs spokesman. It also lost Eastbourne council to the Tories and control in Norwich to Labour.

The party did not increase its overall level of support from last time, gaining 29 per cent of the vote. In May last year, when the party made historic gains in the local authority elections, they had 30 per cent of the vote.

But in these local elections the party targeted carefully to win more seats at the general election. It won all the council seats in the Cardiff Central parliamentary constituency.

Mr Kennedy said his party was being seen as "a breath of fresh air", and acknowledged that Iraq had been a central issue. He said the party's result showed the "tide is going out for Labour" and "three-party politics" was now a reality in Britain.

The result is a personal vindication for the leader, who had faced sharp criticism from Labour over his stance on Iraq. "We have stuck to our principles and argued our case and I think we have won new respect and new-found support as a result," Mr Kennedy said. A spokeswoman added that the party was now the only one to "straddle the country" with the ability to beat both Labour and Tories throughout Britain.

During the campaign, Mr Kennedy covered 7,000 miles visiting target areas, mostly by train. Yesterday, he was in Newcastle to congratulate party workers and said the result had "changed the face of politics" in Britain. But the Liberal Democrats are expected to do less well in the European elections.

In the London mayoral race, Simon Hughes had a dismal result and came in a poor third. Despite campaigning hard, he gained only 15 per cent of the vote, boosting the party's standing by a scant 3 per cent on 2000.