Blair secures his third term - but how long will he last at No 10?

Labour's majority is slashed. War protest bites in London. Tories retake key marginals. Big swings help Lib Dems

Tony Blair saw his majority cut sharply today as Labour was hit by a Tory revival and a protest vote over the Iraq war. The party was still heading for a third successive general election victory for the first time in its history, but suffered a string of surprise defeats.

A BBC projection at 4am forecast that Labour's majority would be slashed from 167 at the 2001 election to 70. A Sky News projection put Labour's majority at 72 ­ still more than halved.

The early results showed that many people who voted Labour in 1997 and 2001 had deserted the party to give Mr Blair a "bloody nose" over the Iraq war, which became the dominant issue in the second half of the election campaign.

Labour suffered a spectacular defeat in Hornsey and Wood Green, north London, where the war was a big issue, at the hands of the Liberal Democrats, who achieved a huge 14.6 per cent swing.

In a clear sign of an "Iraq effect", Labour performed much worse in the capital than other regions. It lost Enfield Southgate, Putney, Hammersmith, Ilford North and Wimbledon to the Conservatives.

But Michael Howard's party failed to repeat its revival in London and the South-east in the Midlands and North. If it had done so, the Conservatives would have come close to wiping out Labour's overall majority. Lady Thatcher, the former Prime Minister, said the results were "not looking good enough for the Conservatives".

Mr Blair suffered a double squeeze as the Liberal Democrats reaped the benefit of anti-war protest votes. Among their wins were Cardiff Central, Taunton, Dunbartonshire East, Ceredigion, Bristol West and Manchester Withington, where they achieved a huge 17 per cent swing.

Defeated Labour candidates were quick to blame Mr Blair's unpopularity and the war for their demise. Bob Marshall-Andrews, conceding defeat in Medway, Kent, said: "It is impossible not to draw the conclusion that the war and the Prime Minister have caused a serious haemorrhage in Labour votes." He called for a change of leadership "sooner rather than later".

After regaining his Sedgefield seat, Mr Blair said: "I know Iraq has been a divisive issue in this country, but I hope now we can unite again and look to the future."

He added: "The British people wanted the return of a Labour Government with a reduced majority. We have to respond to that sensibly and wisely and responsibly. To be re-elected for a third time is very special. Let's make sure we use it."

Gordon Brown, the Chancellor, acknowledged that Labour had suffered a protest vote. He said: "I promise that we will listen and learn so that we can serve our country and our community even better in the years to come."

Although Mr Blair set to enter the history books, the sharp drop in his majority will raise a question-mark over whether he can remain in Downing Street for anything like the "full term" he wishes to serve before standing down. He will face calls from within the party for an early handover of power to Mr Brown, whose allies believe Labour would have suffered bigger losses if the Chancellor had not played a pivotal role in the campaign.

His smaller majority will also provoke doubts over whether Mr Blair could secure the passage through Parliament of radical public service reforms in the face of opposition from about 40 left-wing Labour MPs.

Outside London, Labour lost Peterborough, Hemel Hempstead, Shipley and The Wrekin to the Tories and in Blaenau Gwent a rebel Labour captured one of the party's safest seats.

The Liberal Democrats held on in Cheadle but lost Leicester South to Labour and Newbury and Guildford to the Tories.

An exit poll for BBC and ITV forecast a Labour majority of 66 seats. The survey of 19,800 voters for the BBC and ITV suggested that Labour would win 356 seats, a drop of 56 since the 2001 election; the Tories 209 seats, a gain of 43, and the Liberal Democrats 53 seats, up two.

The poll by NOP and MORI gave Labour 37 per cent of the votes cast (down four points on the last election), the Tories up one point on 33 per cent and the Liberal Democrats 22 per cent (up four points). There were signs that the turnout was higher than the 59 per cent at the 2001 election.

Cabinet ministers hailed an historic victory for Labour. Claiming victory just five minutes after the polls closed last night, the Deputy Prime Minister, John Prescott, said: "What's clear is that Labour is going to be the next government."

Alan Milburn, Labour's election and policy co-ordinator, said: "Tony Blair would be only the second Prime Minister in history to win three general elections in a row with a mandate and a majority for a New Labour programme of government." Mr Milburn announced that he would not continue to serve in the Cabinet, a setback for Mr Blair as he prepared to promote allies when he reshuffles his Cabinet today.

Lord Kinnock, the former Labour leader, said: "The fact is that in a third successive election to get what by any standards is a very substantial majority in the House of Commons is a token of the resilience of Labour and Tony Blair and indeed Gordon Brown and is a secure majority, a very secure majority."

He conceded that Labour's winning margin had been cut by Mr Blair's decision to take the country to war in Iraq. "I think that what has happened is a reward to Labour ­ for extremely good economic stewardship and strong support for the vital services, health and education particularly, mitigated by significant concern about the war in Iraq and its consequences."

Although leading Tories admitted early that the party could not win, they were hopeful of making enough progress to secure a platform from which to win the next general election. Liam Fox, the Tories' co-chairman, welcomed the swing to his party in the early results. "It is clear that the public want to cut Tony Blair down to size and make him more accountable," he said.

Boris Johnson, the Tory candidate in Henley, west London, said: "What we are now seeing I think is the slow, sad political extinction of Tony Blair." The Conservatives' failure to make further progress will, however, spark an internal debate about whether they focused too heavily on their core vote.