On a day in which attacks in Baghdad left over 40 people dead, including 35 children, Labour delegates voted against withdrawing British troops from Iraq.

A core of party members pressed the case for a timetable for troop withdrawal but were defeated on a card vote with 80 per cent of local parties and 90 per cent of trade unions voting against.

Jack Straw, the foreign secretary, and Geoff Hoon, the defence secretary, warned against unilaterally leaving Iraq.

Hoon said: "We cannot abandon the Iraqi people now. We must stay the course and see the job through. What our armed forces are doing today is essential to improving the lives of the Iraqi people."

Straw told delegates: "Yes, the terrorists have killed foreigners, kidnapped others, still hold Kenneth Bigley but overwhelmingly the targets are the Iraqi economy and the victims are ordinary, decent Iraqis who want the chance to rebuild their country and who are being stopped, not by US or UK forces but by these evil men who, knowing that they cannot succeed by ballot, seek to impose their will by bullet and by bomb."

The Lord Chancellor set out plans for a renewed push towards Lords reform.

Lord Falconer told Labour delegates that if re-elected, ministers would introduce a Bill to revamp the upper chamber in the first session of the new parliament.

John Prescott closed the conference by attacking the "empty rhetoric" of George Bush.

"If anyone is in doubt about what happens when the right takes over a country,"  Prescott told the delegates. "Ask the Americans."

Prescott went on to dismiss Bush as "another right-winger who used compassionate Conservatism as his soundbite".

He also dismissed suggestions that Labour is poised to announce a reprieve for fox-hunters.