Gordon Brown's authority suffered a devastating blow today as a minister quit in the row over his leadership.
David Cairns finally resigned from his post at the Scotland Office after a day of fevered speculation in Westminster.
The move followed an intense bout of Labour infighting, which was sparked when Government Whip Siobhain McDonagh broke ranks on Friday to call for a leadership contest.
The Prime Minister acted quickly to sack Ms McDonagh - a close friend of Mr Cairns - and was then also forced to fire two other MPs who had worked for Number 10 as envoys.
A statement from Downing Street said today: "The Prime Minister has accepted David Cairns' resignation. The exercise of Government demands collective responsibility."
The news came hours after Labour's ruling executive rejected rebel demands for leadership nomination papers to be sent out.
More than 10 Labour MPs have asked for leadership nomination papers to be sent out to all their colleagues ahead of the party's conference in Manchester this weekend, a move which they believe would increase the chances of unseating Mr Brown.
However, a meeting of the National Executive Committee today dismissed those calls. A party spokesman said the NEC had agreed "without dissension" that the forms did not need to be issued.
The chaos within Labour continued despite a warning from former Foreign Secretary Margaret Beckett that the public "would not forgive" the party for infighting amid the economic crisis.
She told BBC Radio 4's Today programme that "no-one could be happy" with the current situation, but this was not the time for a "substantial debate" about the leadership.
"When we are in Government and we have a Prime Minister and there are very serious international concerns about the economy and so on, I really don't think that most people will think we should be wanting to spend our time on discussing whether we should have a different Prime Minister," Ms Beckett said.
Chancellor Alistair Darling also rallied round the Prime Minister, insisting he was the "right person" to lead the country through turbulent times.
"I have every confidence in Gordon Brown," he said. "I believe he is the right person to lead this country and to lead our party and I know that at the conference next week he will set out his vision for the future."
The NEC had been considering a technical point over whether party rules meant nomination forms should always be sent out before conference, rather than just being available on request.
Some 71 MPs have to nominate a candidate in order to spark a leadership challenge, and the rebels argued that many were being put off by having to come forward and ask for a form.
However, a statement from NEC chair Dianne Hayter said: "The Labour Party national executive committee is in agreement that internal procedural debates will not divert the Labour Party from our mission of building a fairer Britain and helping people through these challenging times."
She added: "The Labour Party has followed this procedure for 11 years, as long as we have been in government under these present rules, and it has not required the issue of nomination forms at any time."
A spokesman for the Prime Minister said later: "David Cairns remains a minister of the Government."
Downing Street denied that speculation over Mr Brown's future was diverting him from dealing with the economic crisis.
"The Prime Minister is focusing on the big issues facing the country," the spokesman said.
The Cabinet met this morning for 45 minutes, and spent most of the time discussing the economy. Ministers also received updates on Zimbabwe, Georgia, and the situation in Northern Ireland, the spokesman said.
Chairman of the Parliamentary Labour Party Tony Lloyd said today the rebels' move was damaging the party and urged a return to "real politics".
He told BBC News: "The challenge is damaging in its public impact, it's trivial in its real impact - and that's the paradox."
He said "many, many, many more MPs" would be required to come forward to mount a "serious leadership challenge".
Mr Lloyd went on: "We have got to get back to real politics and the things that affect people."
Leaving 10 Downing Street, Labour Party Deputy Leader Harriet Harman said that the call for a leadership election had not been discussed in the meeting and said the Cabinet members were in support of Gordon Brown.
"They are in the Cabinet and they obviously back Gordon Brown because he is the best person when there is difficult international economic circumstances, he is the foremost person with the experience to take us through these difficult times."
Ms Harman said the Cabinet meeting had focussed on economic issues.
"The Chancellor of the Exchequer and the Prime Minister are going to be working with the Bank of England and the Financial Services Authority to make sure that we keep the economy as sound as possible, and that dominated - as you would expect - the discussion in Cabinet this morning," she said.
When asked if Cabinet members discussed calls for a new leadership during the meeting, she said: "No we didn't. We did discuss our conference and we are putting forward a document about how we are going to help Britain deal with the changes that are affecting not just this country but the world in the future.
"Our strong sense of values, of fairness, that's going to be underpinning that.
"I think that we recognise that that's what the country expects us to do and that's what I think the Labour Party members expect us to do as well. "
She added: "Our concern is to make sure that we keep the economy strong, make sure that we keep as many people as possible in work and we've still got record high levels of employment, to make sure that we keep inflation down.
"This is what we've been elected to government to do, this is what Labour Party members in this country expect us to do and that is what we are going to get on with and that is what we've been doing this morning."Reuse content