Historic victory for Blair

Tony Blair survived anger over the Iraq war to secure a historic third straight victory yesterday - but a slashed majority in parliament could sink his ambition to serve out a full term.

"Iraq has been a deeply divisive issue in this country... (But) after this election people want to move on," the chastened Prime Minister said in a victory speech after returning home to 10 Downing Street in London.

"I've listened and I've learned and I think I've a very clear idea of what the people want for a third term," Mr Blair said.

Mr Blair became the third of the key global allies in Iraq - after US and Australian leaders George W. Bush and John Howard - to win re-election postwar.

Mr Bush sent his congratulations from Air Force One. "The President looks forward to continuing to work with Prime Minister Blair. And the President congratulated him on an historic third victory," White House spokesman Scott McClellan told reporters travelling with Mr Bush to Riga.

Mr Blair's defeated main rival, Conservative leader Michael Howard, unexpectedly stood down, plunging the once-mighty party of Margaret Thatcher and Winston Churchill into fresh turmoil.

Although shunned by some former supporters as untrustworthy, Mr Blair has secured his place in British history, becoming the only leader other than Ms Thatcher to win three elections in a row.

He is also the first leader to win three successive terms for the centre-left Labour party.

Mr Blair swiftly moved to establish his new ministerial team, retaining key figures like finance minister Gordon Brown and foreign minister Jack Straw but changing the faces at key posts like defence, health and Northern Ireland.

With most results in, Mr Blair was heading for a majority of 66 seats in the 646-seat House of Commons, sharply down from 161 last time. His biggest problems have come not from the Conservatives but rather from within his own party.

A hard core of between 30 to 40 Labour members of parliament (MPs) have voted consistently against Mr Blair in the last two years, with more defying him on individual issues. Final results seemed unlikely to cut the size of that "awkward squad" by much.

Projections suggested Labour only secured 36 per cent of the vote, an all-time low for a winning party, with many voters accusing Mr Blair of misleading them by hyping intelligence on Iraq's weapons to justify going to war.

Mr Blair's reduced majority could hinder his legislative programme and hasten a handover to Mr Brown, his powerful finance minister and assumed heir.

Mr Blair, who turned 52 yesterday, has said he plans to stand down at the end of a third term, a move critics say may make him a lame duck whose government will be riven by in-fighting between potential successors.

A potentially tough fight to persuade Britons to approve the European Union constitution in a promised 2006 referendum could, if he lost, hasten his exit.

Mr Blair promised a "radical programme" of domestic reforms in health, education, immigration and law and order policies. On the international front, Mr Blair said poverty in Africa, climate change and the Israeli-Palestinian conflict were his priorities.

Despite his ambitions, the election will fuel a view among many Labour MPs that Mr Blair is a liability rather than an asset. Some were openly saying they wanted Mr Brown, who is far more popular with both party and public, to take over immediately.

Dissent could bubble over at a party conference this year. Mr Brown, the 54-year-old Chancellor of the Exchequer, is widely credited with masterminding the stability of Britain's economy, which has outperformed its European neighbours during the global downturn and was a big vote-winner for Labour.

Financial markets had not been expected to react strongly to a reduced Labour majority, but the pound fell against the dollar and slipped to a two-week low against the euro in early trading.

Noting his age, 63-year-old Howard said he could not stand again and would step down once a new leader was chosen.

The Conservatives had branded Mr Blair a liar during the campaign over his justification for the Iraq war. But their case was hampered by their having backed the action in 2003.

Mr Blair lost one loyal MP, Labour's Oona King, solely to the Iraq factor. She was beaten by George Galloway, a radical expelled from the Labour party for attacking Mr Blair over the war, in an east London seat with a large Muslim population.

"All the people you killed, all the lies you told, have come back to haunt you," Mr Galloway told Mr Blair in his victory speech.