Blair faces last electoral test

By Adrian Croft

LONDON (Reuters) - Prime Minister Tony Blair faces the last electoral test of his decade in power on Thursday, a vote that could set Scotland on course for a referendum on independence.

Blair's Labour Party is expected to suffer heavy losses in the elections to local councils, the Scottish parliament and Welsh assembly as the Iraq war, political scandals and discontent with public services cost the party support.

The result could be a bitter farewell for Blair, the Labour Party's longest-serving prime minister, who is expected to announce next week he will leave office by July.

The local council elections will measure Conservative leader David Cameron's progress as he attempts to build his centre-right party into a force that can challenge for national power again after 10 years in the wilderness.

"I think its going to be a bad night for Labour," Wyn Grant, politics professor at Warwick University, said, predicting Labour could lose several hundred council seats.

But the main focus will be on Scotland, where opinion polls suggest Scottish National Party (SNP), which wants independence from Britain, could oust Labour as the biggest party in the Scottish parliament, ending 50 years of Labour dominance in Scotland.

That could allow SNP leader Alex Salmond to rule in coalition in Scotland and put in practice his plan for a referendum on independence in 2010.

An SNP breakthrough would be a setback to Blair, who backs England's 300-year-old union with Scotland. Labour hoped to defuse calls for independence by setting up the Edinburgh parliament in 1999 with limited powers over Scottish affairs.