Former Prime Minister Sir John Major has said there may be "quite a serious reaction" from the markets if a stable government is not put in place soon.

"The longer we wait, the more stable the markets will expect the government to be," he told Today presenter James Naughtie. "I don't think this is a dance that can go on for too long."

Sir John conceded that "cherished ideas" would have to be given up for the sake of stable government, but argued that this was not the time to draw up electoral reform "on the back of an envelope".

With economic circumstances "pretty near the abyss", he urged the Liberal Democrats to be wary of Labour promises.

While they were "offering the earth", he said, it was only the Conservatives who would be able to deliver on any promises made.

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