The Conservatives' reversal of Labour's majority at Crewe and Nantwich is as bad as it gets for Labour. It is evident that not only did some Labour voters stay at home but many of them switched straight to the Conservatives. Whether they will stay with them in a general election remains to be seen.
However, Gordon Brown is not going to resign nor are 70 MPs going to nominate an alternative leader. There is no clear alternative candidate. Alan Johnson would go down well with party activists, backbenchers and trade unionists, but less well with Middle England. David Miliband is still too inexperienced.
In many respects it's a case of 'The Economy, Stupid' and an economic recovery could do a lot for Labour's fortunes. However, it looks like there has been a step change in the price of oil which is not good for inflation or the economy generally. One welcome by-product is that East Asian countries may now reduce their subsidies of oil.
The Liberals got badly squeezed at Crewe, but can blame this on a two horse race.