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Elwyn Watkins, the Liberal Democrat candidate, said he believed Conservative voters were switching to support his party.

"Who knows?" he said just a few hours before the polling stations closed. "I'm never a confident candidate in thinking the whole thing's going well but it looks like our vote is coming out."

It was Mr Watkins' legal bid that prompted the by-election - he accused the then-Labour MP, Phil Woolas, of lying about him to win the seat in last May's General Election.

FM
I don't really understand how the political media are spinning this as a "must win" seat for Labour. 

Only seven months into the government and the government should be still on its honeymoon period.  The Tories took about three years before they polled higher than Tony Blair's Labour and then it was a brief spike in popularity due to the fuel protesters.

Considering the Lib Dem candidate was a victim of dirty tricks character assassination by Labour's Phil Woolas, if the government were making the tough-but-fair-decisions they claim they're making (which they aren't), the Lib Dem candidate would have taken the seat with absolute ease.
Carnelian
Cameron was more concerned about the LibDem vote falling away than that of his own party.  Hence the lacklustre campaign by the Tories.  Tory voters switched to  the LDs to ensure they weren't humiliated, (allegedly) and to prolong the life of this coalition.  They are anxious to avoid another General Election
FM

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