Mr. Blair, right, his wife Cherie, second left, their sons Nicky, and Leo, centre, as they stand on the steps of 10 Downing Street in London after Blair was re-elected as Prime Minister for a third term, Friday May 6, 2005

British Prime Minister Tony Blair has led his Labor Party to a record-setting third-consecutive victory, but with a sharply reduced majority in parliament.

Mr. Blair now joins former Conservative Party leader Margaret Thatcher as the only British prime minister to win three general elections in a row.

But the victory is bittersweet for Mr. Blair, as voters rejected many Labor Party candidates across the country, and his controversial decision to join the Iraq war was a drag on the party.

After meeting Queen Elizabeth to confirm his re-election, Mr. Blair told the country he realizes the Iraq war had a big impact on the election.

"I know that Iraq has been a deeply divisive issue in this country," Mr. Blair says. "That's been very, very clear. But I also know and believe that after this election people want to move on, they want to focus on the future in Iraq, and here."

Mr. Blair's main rival, Michael Howard of the Conservative Party, has announced that with his party's third-straight loss to Labor, he will be stepping down as leader.

"I'm 63 years old. At the time of the next election, in four or five years time, I'll be 67 or 68. And I believe that is simply too old to lead a party into government," Mr. Howard says.

His announcement sets the stage the fifth leadership change since 1997 for the Conservatives, who once dominated British politics but in recent elections have failed to attract more than about one-third of the votes.

For the Labor Party, the focus now shifts to how Mr. Blair will govern with his majority in parliament slashed by nearly 100 seats. Some of the more rebellious Labor members of parliament predict he will have trouble passing some of his controversial proposals, such as national identification cards and indefinite house arrest of terrorist suspects.

Also, Mr. Blair will appear less formidable since he has already announced this will be his last election. He says he intends to serve a full term, but there is already speculation he may have to hand off power in a year or two to his heir apparent, Finance Minister Gordon Brown.