Thursday was a tough night for the governing parties, with significant Labour gains in council elections across the country and the rejection of a flagship government policy in referendums for elected mayors.

If the 38 per cent vote share Labour achieved in local elections is repeated in three years' time at the General Election, the coalition would be out and Labour would return with a majority similar to what they enjoyed between 2005 and 2010.

In some places, Labour recorded huge swings to seize control of key councils, adding 22 to the 28 they already held. In Birmingham, Labour needed just four seats to gain control, but after claiming half the seats at stake they ended with a 34-seat majority. Ed Miliband, leader of the Labour Party, travelled to Birmingham to celebrate the results.

Commenting on his party's victory, he said: "This government promised change and it made things worse, not better."

In Southampton, where Miliband kicked off his local election campaign, Labour won 11 seats to regain control. Outgoing leader Royston Smith said: "Hopefully this is just a blip. It's a natural thing that happens in politics, the pendulum does swing." But local Labour MP John Denham had a different take: "Voters throughout the city were saying things like, this new government said things were going to change... but things are getting worse."

The government's plans were dealt another blow with the first cities to return their referendum results on whether to have directly elected mayors rejecting the proposal. In Coventry, almost two-thirds of voters rejected the plans, and while the margins were closer in Manchester, Nottingham and Bradford. Bristol brought some relief for the government as votes opted to have a mayor.

The idea of locally elected mayors is a key part of the government's plan to devolve power to a local level. Grant Shapps, minister in the department of communities and local government, insisted that this was what the policy was all about – giving people the choice to decide how their area is run. Despite his protestations, the 'no' votes will be seen as a rejection of the government's agenda as well as the outworking of a general distrust in the idea that more politicians are the answer.

In Liverpool, where the council bypassed the referendum, Labour's Joe Armstrong was elected mayor. The current leader of the council had promoted the policy – ensuring it got the necessary two-thirds majority of council support to skip the popular vote – and when the votes were tallied won by a huge margin. With just short of 60 per cent of the votes, he was immediately elected, with no need to redistribute the second preferences of lower ranked candidates. His nearest rival was the independent candidate and former BBC journalist Liam Fogarty, with only eight per cent of the vote.

Appearing on the election broadcasts as the polls closed, Conservative co-chairman Baroness Warsi anticipated a poor night for the party. However, she seems to have failed at managing expectations – her prediction that Labour would gain 450 councillors was easily passed with dozens of councils still to declare their result.

The Conservatives' coalition partners also suffered a difficult night. The Liberal Democrats now have fewer councillors than at any time since the party was formed in its current incarnation in 1988. Ed Davey, secretary of state for energy and climate change quipped: "We've been waiting 90 years for the mid-term blues."

Baroness Warsi also courted controversy by suggesting that the UK Independence Party would benefit from standing in places where the British National Party had run in the past but were not this time round.

In the places where they stood, UKIP increased their share of the vote to 14 per cent. Conservative back-bench MP Gary Streeter suggested that this was a warning to his party: "They don't think our leadership is Conservative enough."