British Prime Minister Gordon Brown has vowed to "fight on" to rescue the economy and clean up politics.
Mr Brown admitted Labour had suffered "a painful defeat" in Thursday's council elections but said: "I will not waver. I will not walk away. I will get on with the job."
Labour has lost control of all the county councils it was defending in local elections in England.
Two more cabinet ministers - Geoff Hoon and John Hutton - have stepped down but neither backed a challenge to the PM.
Mr Brown resfhuffled his Cabinet following several resignations in the past week.
Speaking at a Downing Street media conference, the Prime Minster said the current political crisis, fuelled by the Westminster expenses scandal "is a test of everyone's nerve - mine, the government's, the country's".
He added: "If I didn't think I was the right person to lead these challenges I would not be standing here."
But speculation about his future continued as Labour MP Ian Gibson said he was standing down to force a by-election in Norwich North - and said he thinks Mr Brown's days "are close to being numbered".
Mr Brown unveiled Glenys Kinnock, the wife of former party leader Neil Kinnock, as Europe minister in a surprise move.
Alan Johnson becomes home secretary and Andy Burnham succeeds him at health.
Lord Mandelson's role has been expanded, giving him responsibility for higher education and training.
According to the BBC's projected share of the national vote at a general election, based on the English local election results, the Conservatives would poll 38%, the Lib Dems 28% and Labour would be third on 23%.
In Staffordshire, which had been under Labour control since 1981, the party lost 28 seats.
Labour also lost Derbyshire, Lancashire and Nottinghamshire, losing control of its last four county councils in England. It lost 250 council seats, most of them going to the opposition Conservative Party.
Conservative leader David Cameron said it showed his party was on course to win the next general election, adding that Labour had "lost the right to govern".
"We have clearly won this election and turned in some remarkably good results," he said.
Labour is braced for another poor performance when the results of European elections are announced on Sunday.
