The Conservatives had predicted they would gain more than 200 seats, a significant advance which would raise their hopes of victory at the next general election. They predicted Labour would win its lowest share of the vote since records began in 1973.
But with around 50 councils counting ballots today, Labour's total deficit could hit 250 or 300 before Mr Brown's pain is complete.
The Tories gained Nuneaton and Bedworth from Labour, ousted the Liberal Democrats in West Lindsey and took control in Bury, Harlow, Southampton, Maidstone and Wyre Forest – councils where no party previously enjoyed a majority.
A BBC projection of the national share of the vote, based on 1.5 million votes cast, put the Tories on 44 per cent, the Liberal Democrats on 25 per cent, with Labour trailing in a humiliating third place on 24 per cent and other parties on 7 per cent.
The results were a huge setback for Mr Brown. When he succeeded Tony Blair last year, Labour had high hopes that he would enhance the party's performance in the polls. It would be highly embarrassing for him for Labour to do worse than last year, when it won 27 per cent in the council elections, and in 2004, when it managed only 26 per cent amid a backlash over the Iraq war.
A Tory spokesman said: "Gordon Brown has had his Life on Mars moment. He went to sleep in 2008 and today he's waking up with support back to the worst his party has seen since records began in 1973."
George Osborne, the shadow Chancellor, said: "These are the first elections Gordon Brown has fought as Prime Minister, so they are not mid-term in the classic sense. Labour have done their big gamble in Parliament, they have changed their leader without even having a leadership election let alone a general election and we will see how he does."
Labour figures conceded the party had suffered a "mauling" but insisted that yesterday's elections were fought against the worst economic backdrop since the party won power in 1997.
Tony Lloyd, chairman of the Parliamentary Labour Party, warned that the Government needed to show people what "it is there for" and demonstrate its fitness and competence. He said: "The Prime Minister, like the rest of the Government and rest of the Labour Party, has got to listen to what the public has been saying. They want the Government to listen to their concerns."
Reports to Labour headquarters from local officials said the party had struggled to persuade its natural supporters to turn out. Labour aides said the party's performance in the council polls had been weakened by channelling scarce resources into the London mayoral campaign.
They conceded that the combination of the global credit crisis, an unpopular Budget and the row over the 10p rate had provoked a voter backlash. Labour MPs said that last week's promise to compensate some of the 5.3 million losers from the tax shake-up had come too late to limit the damage in yesterday's elections. Several MPs reported that angry low-paid workers had walked into their constituency offices brandishing payslips showing their tax bills had gone up.
Mr Brown will accept responsibility for the poor results today. He will try to fight back by launching new policies on "bread-and-butter" issues to show that the Government has not lost touch with the problems facing ordinary families. They will include extra help for first-time buyers to get on to the property ladder. The Prime Minister will focus on policies and will resist calls to freshen up his government by carrying out a swift cabinet reshuffle. Allies said there was no question of him being forced out before the general election.
The scale of the huge task facing Mr Brown is shown by The Independent's latest monthly "poll of polls", in which Labour has dropped to a new low since he succeeded Mr Blair. The weighted average of the opinion polls taken in April puts the Tories on 40 per cent, Labour on 30 per cent and the Liberal Democrats on 18 per cent. If the results were repeated at a general election, Mr Cameron would win an overall majority of 12.
It is the first time the Tories have enjoyed a 10-point lead since the "poll of polls" began in 2005. Labour's rating is its joint lowest, equalling its position a year ago, before Mr Blair resigned.
John Curtice, a professor of politics at Strathclyde University, who compiled the figures, said: "Labour now finds itself as unpopular as it was in Blair's final months, and with a leader that is unpopular as Blair ever was. In short, the party is back at square one – except that, compared with 12 months ago, the public have lost confidence in the future of the economy."
Labour's popularity, which had already taken a knock after the March Budget, suffered another blow when the row over the tax shake-up erupted during the local-election campaign. In the six polls taken since then, Labour averaged just 29 per cent, with the Tories on 40 per cent. In the past month, Mr Brown's personal ratings fell back again. However, there was little sign that Mr Cameron's ratings have improved.
Although people feel more gloomy about the economy, Professor Curtice said: "Labour's one hope is that perhaps the Tories have still not done enough to convince sufficient people that they could do any better."
There was more gloomy news for Mr Brown last night in an ICM survey for the BBC. It found that Mr Cameron is regarded by the public as more competent and decisive and as more of an asset to his party than Mr Brown.
Some 58 per cent of people regard the Conservative leader as competent, while only 46 per cent say the same of the Prime Minister. More than half (52 per cent) think that Mr Cameron is decisive, while Mr Brown scores only 38 per cent.
Mr Cameron is seen as an asset for the Tories by 68 per cent, with only 24 per cent regarding him as a liability. In contrast, a majority (52 per cent) consider Mr Brown a liability for Labour and only 42 per cent an asset.
Mr Clegg, in his first election as Liberal Democrat leader, would be pleased to push Labour into third place. But the ICM poll suggests he has not yet made much impression on the public. Three in 10 people (29 per cent) are unable to say whether he is an asset or a liability. Some 43 per cent see him as an asset and 27 per cent a liability.
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