Gordon Brown has announced British troop numbers will be reduced in Iraq as he fought back after claims of dithering over a snap election.

In a key address to Parliament on Iraq policy, Mr Brown said British forces in the south of the country would switch from a fighting role to an "overwatch" role.

As he announced the UK will reduce its force in the country - currently numbering over 5,000 - to 2,500 troops from spring 2008, thousands of anti-war demonstrators could be heard outside Westminster.

Mr Brown also promised a resettlement package for some Iraqis who had worked with UK forces for more than a year to move within Iraq or apply to come to Britain.

He said: "We plan, from next spring, to reduce force numbers in southern Iraq to a figure of 2,500.

"Existing staff who have been employed by us for more than 12 months and have completed their work will be able to apply for a package of financial payments to aid resettlement in Iraq or elsewhere in the region, or in agreed circumstances for admission to the UK."

Earlier, during his monthly press briefing, he responded to accusations that he had treated the public "like fools" over his decision not to hold an autumn election.

Mr Brown confirmed he had considered calling a snap election but said he wanted more time to set out his vision for the future of the country.

He said: "Yes, I did consider holding an election. Yes, I looked at it.

"My first instinct, if I were honest with all of you, was that I wanted to get on with my job of putting my vision of what the future of the country was to the people of the country and deliver on it before there was ever an election."

He continued: "But I did listen to people. I looked at what people were saying. I heard from candidates in marginal seats - those candidates in marginal seats were telling us we would win the election."

"I happen to believe we would win at any time. I made my decision on this basis: I wanted more time to set out my vision for the future of the country.

"We had had a summer dealing with issues from foot-and-mouth to floods to terrorism to economic and financial crisis.

"I had not yet had a chance to put forward my vision about health, about housing, about education, about the future of our economy and prosperity generally, and that is why I made the decision I did."

Asked if he thought he received good advice from those around him, he responded: "I take full responsibility for everything that has happened."

Asked by reporters whether the situation had been handled well, Mr Brown joked: "I think your weekend has been better than mine."

He said of his decision: "I could have made it earlier, perhaps I should have made it earlier, but I decided I would make my statement at the end of the party conference season."

While insisting he does not want an election yet because he wants time to spell out his vision for the country, he conceded: "Obviously I saw the opinion polls."

The Prime Minister said an election is "not likely" in 2008, but declined an invitation to name a date in 2009 for the poll.

Later, Mr Brown is expected to address the Parliamentary Labour Party - a traditional engagement for the party leader when the Commons returns from its summer break.

The Queen has paid tribute to the thousands of servicemen and women killed since the end of the Second World War at the dedication of a memorial to honour them.

The Duke of Edinburgh, the Prince of Wales and the Duchess of Cornwall joined her at the ceremony for the new National Armed Forces Memorial.

The National Memorial Arboretum, in Alrewas, Staffordshire, pays tribute to members of the UK's Armed Forces killed on duty or as a result of terrorist action since 1948.

The royal party entered the ceremony as a military band, seated in front of the memorial's Portland stone walls, played the National Anthem.

Prime Minister Gordon Brown, MPs and families of those whose names feature on the memorial watched as prayers for the deceased were said by the Archbishop of Canterbury.

There are currently 16,000 names carved on the memorial, with space for 15,000 more. It includes those who have died in Palestine, Korea, Malaysia, the Falklands, Iraq, Afghanistan and Northern Ireland.

Opening the ceremony, Vice-Admiral Sir John Dunt, chairman of the Armed Forces Memorial Trustees, said: "I hope that those who have been bereaved and colleagues of those whose names are engraved find this a fitting place to remember and reflect.

"There will be sorrow for family and friends who come here, but I hope they will also be uplifted and proud - proud that these men and women who paid the ultimate sacrifice have done so by serving their country."

His speech was followed by prayers and hymns and a reading by the Duke of Edinburgh.

The Archbishop of Canterbury, Dr Rowan Williams, led more prayers before the royal party were escorted to view the memorial.