Bookmakers today slashed the odds on a Tory victory at the next General Election – hours after the party cut into Labour’s previously daunting majority.

The Conservatives are now at their lowest price since 1992 to form a Government when the nation next goes to the polls.

High street betting shops took a record £10 million in bets on yesterday’s election and are now relishing the prospect of a new round of wagers on the Tory leadership contest.

Within minutes of Michael Howard’s announcement that he is to stand down, Shadow Home Secretary David Davis was installed as firm favourite to replace the leader.

Ladbrokes have made him 5/2 favourite to take on the role, whilst William Hill will offer odds of 3/1.

Party co-chairman Dr Liam Fox is priced at 6/1 with Ladbrokes, with rising star David Cameron at 9/1 and Shadow Health Secretary Andrew Lansley at 10/1.

William Hill offer Malcolm Rifkind at 7/1, Mr Fox at 8/1 and former leader William Hague at 14/1.

Bookmakers are also braced for bets on the future of the Labour leadership, with the odds drastically shortened on Gordon Brown becoming Prime Minister by the end of the year.

However, the industry said only a handful of people enjoyed big successes last night – with one punter claiming £10,000 after staking £200 on Respect leader George Galloway to claim his tightly fought contest in Bethnal Green and Bow.

“It was a good night for bookmakers as punters overestimated the strength of Labour and the Lib Dems and underestimated that of the Conservatives,” said Warren Lush, of Ladbrokes.

“There was plenty of money for a Labour majority of 85-plus and the Lib Dems to make bigger gains than they did. We loved the swing – we’re swinging from the chandeliers.

“The industry has taken over £10 million on the election, doubling that of 2001 and making it the biggest-betting British General Election ever.”

William Hill said it had paid out significant sums on bets for a Labour victory and as a result of Mr Galloway’s defeat of defending MP Oona King.

The biggest single wager was £100,000 at 1/11 on a Labour majority, earning the punter a profit of £9,000.

“There were bets on every aspect of the election, from the level of turnout to the colour of shirt Mr Blair would be wearing when his seat was called,” said a spokeswoman.

“We are now already looking ahead to the next General Election, with Labour at 4/9 and the Tories at 13/8 – their lowest price since 1992.”

Odds on Mr Blair stepping down by the end of 2005 have been cut from 7/1 to 4/1.