A decade after they promised "things can only get better", Labour are relieved things could have been worse, as the local election results show the party avoided a humiliating defeat.
The Conservatives have increased their share of the national vote across England, but failed to make the gains many within the party predicted.
David Cameron's party appear on course to win 41 per cent of the national vote and have gained control of 39 councils, including high-profile wins in Blackpool and Gravesham.
However, they failed to make the inroads into northern suburbs that Mr Cameron had previously said were crucial for success at a general election.
312 of 312 seats declared
Labour have lost eight councils, but may have increased their share of the national vote.
According to BBC estimates, both the Conservatives and Labour have seen their share of the vote increase one point to 40 per cent and 27 per cent respectively. The Liberal Democrats have slipped one point to 26 per cent.
Despite high-profile wins early in the evening, the Liberal Democrats failed to capitalise on declining support for Labour. Sir Menzies Campbell's party gained control of Kingston upon Hull and Eastbourne, but overall failed to improve on last year's local election results.
Sir Menzies admitted the results were a "mixed bag", but said success in Hull and Eastbourne was "extremely acceptable".
Mr Cameron downplayed suggestion of an anticlimactic win for the Tories, insisting the party have achieved "stunning results on both sides of the Pennines".
Speaking in London this morning he said: "We have councillors right across the north of England. We are one national party speaking up for Britain."
The Conservatives are now the single largest party in Birmingham for the first time in 24 years, but failed to take overall control. They also made significant gains in Woking, Gravesham and Blackpool among others.
Dartford, where Mr Cameron launched the local election campaign and often a significant barometer of the general elections, also elected the Tories.
However, the Tories failed to elect a single councillor in Manchester. More importantly, they failed to take northern suburban councils such as Bury, which Mr Cameron last week claimed were milestones for a general election win.
Labour have retained control of Stevenage, but are now virtually excluded from local government in much of the south-east outside of London. They have also been wiped out in the West Country, after the Tories won North Devon. They also lost control of Blackburn, a traditional Labour stronghold.
Labour chairman Hazel Blears admitted there were "lessons" the party could learn from the election, but insisted Labour have not lost too much ground to the Conservatives.
"I am not saying it was a brilliant night for Labour," she told the BBC. "But I don't see that surge from the Conservatives."
Labour officials have kept stoically to the party line, insisting some slippage is inevitable midway through a third term.
Briefing papers leaked to the Guardian last night indicated the party was anticipating a poor result and ministers may have been buoyed by the comparatively modest losses.
Ministers were told to maintain "this was always a very tough set of midterm elections for Labour", and avoid speculating until the results were known. If pressed on losses, officials were told to say the only poll that matters is the next general election, but rebut calls for a snap general election after Tony Blair's departure.