Gordon Brown resignation: David Miliband is favourite to become new Labour leader

• David Miliband, the Foreign Secretary, is the favourite. Picture: PA

Within minutes of Gordon Brown's resignation announcement, Labour figures began to talk about the Foreign Secretary as the front runner in a competition that will be keenly fought and could last for weeks.

But Mr Miliband said last night that no official candidates would step forward until the coalition governement issue had been settled.

And MPs warned that the party must avoid a coronation, similar to the contest experienced by Mr Brown in 2007, where he was nominated by the overwhelming majority of his colleagues and elected without a formal vote being held.

They called on the party to stage a proper competition to select the best candidate in order to avoid the damaging splits emerging among differing factions that have been a feature of the Brown premiership throughout his three-year stint.

Yesterday, Mr Brown indicated that he expected a full blown leadership race could be staged, as he confirmed he would stay in post until such time as a new leader could be elected under the party's complex rules.

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Labour's national executive committee, which will set out the timetable for the contest, will meet today to announce the parameters of the election.

That will pave the way for several senior figures within the party to announce their candidacy and insiders indicated they expected a raft of candidates to emerge in the coming days.

They are expected to include current schools minister Ed Balls, who will command support among the trade unions – organisations permitted a vote under the Labour constitution.

Previously, it was thought he could be endorsed by Gordon Brown, but the Prime Minister indicated yesterday he would not offer his backing to any candidate.

Other contenders include current deputy leader Harriet Harman who is at 16/1; the Chancellor Alistair Darling at 10/1; Home Secretary Alan Johnson at 6/1, and the younger Miliband brother Ed, at 9/1.

The news came as bookmakers reacted to the continuing uncertainty of the ongoing coalition talks. William Hill confirmed that the odds on another election being held this year had shortened to 7/4, with another poll being held in 2011 at 2/1 and 2012 at 7/2.

David Miliband was installed as the 1/2 favourite for the Labour leadership after a bookmaker received a flurry of early bets on him, including one stake of 2,500. His candidacy was endorsed by Labour peer Lord Falconer who described him as the "best candidate", and he also received early support from two Scottish Labour figures.

David Cairns, the MP for Inverclyde, said he would back the Foreign Secretary. "I have not said that in public, but that's been my position for a while," he said. "He is Foreign Secretary, the most senior figure in the race, given that the Chancellor won't stand, and I don't think the Home Secretary will either.

"It's very important we allow a competition. It was a terrible mistake not to have a leadership election when Gordon Brown became Prime Minister."

He added: "In 1994, if Tony and Gordon had stood against each other and Tony had won we would have been spared the agony of the last few years."

Another Scottish Labour MP who did not wish to be named added: "Obviously David Miliband would have my support, my preference would be for David before Ed.

"Unfortunately, in the past Alan Johnson has not given any indication of an interest. I think he would be seen as an acceptable face, but it is right we should be going for the younger generation and that would bring David Miliband in.

"He has the same style as Cameron and Clegg, although different policies, obviously. It's the charisma factor."

If he were to announce his candidacy, Mr Miliband could count on the support of several Labour big-hitters in the cabinet as well as former leader Tony Blair and some among the union movement. Lord Mandelson is also thought to be supportive of him, despite reportedly urging him not to run against Brown in the failed coup instigated by former ministers Geoff Hoon and Patricia Hewitt in January.

Outsiders in the race include Justice Secretary Jack Straw at 33/1 and Work and Pensions Secretary Yvette Cooper at 66/1.

Graham Sharpe, a spokesman for William Hill, said: "The political punters have been waiting. Up to 1 million is likely to be gambled provided it doesn't turn into a one-horse race," he added.