GORDON Browns hopes of rescuing his ailing government with a smooth Cabinet reshuffle were in tatters last night after Home Secretary Jacqui Smiths resignation.

Her decision to step down within days following hugely damaging revelations about lavish expenses also came at the worst time for the PM, on the eve of tomorrows crucial European and local elections.

In further evidence of the growing disarray, a backlash was gathering against the expected promotion of Ed Balls to succeed the doomed Alistair Darling as Chancellor.

Blairite MPs warned the choice of Mr Balls Mr Browns closest ally and former economic adviser would be widely seen as the PM reverting to tribalism amid the crisis.

In another day of extraordinary drama at Westminster, two other ministers childrens minister Beverley Hughes and Cabinet Office minister Tom Watson also quit the governmnent.

Ms Hughes is also the Minister for the North West, hand-picked by Mr Brown to co-ordinate efforts to pull the region through the recession.

The chaos cast a further shadow over the PMs attempts to avoid a rout at the ballot box tomorrow and a possible coup by panicking Labour MPs.

Many at Westminster believed the Home Secretary jumped before she was pushed in the reshuffle expected by Monday.

But her aides insisted she had told Mr Brown two months ago of her intention to leave the Cabinet at the reshuffle, because of the battering from the expenses furore.

In April, it was revealed Ms Smiths husband mistakenly claimed £10 in parliamentary expenses for two adult films he watched in the familys constituency home.