The full scale of the task facing Prime Minister-in-waiting Gordon Brown is becoming clear as the Labour Party begins planning how to bounce back from its drubbing at the polls.
The party's first defeat in Holyrood elections came as it lost almost 500 council seats and was forced to look for a coalition partner in the Welsh Assembly.
The Scottish National Party insisted Labour had lost the "moral authority to govern" in Scotland after becoming the biggest party in Holyrood for the first time.
Mr Brown, who is expected to take over as Prime Minister within weeks, had hinted he was unwilling to work with SNP leader Alex Salmond.
But the Chancellor signalled on Friday night that he is ready to "listen and learn" to the results of Thursday's elections.
The Conservatives were celebrating after gaining more than 900 council seats and taking control of 39 new town halls, hailed by leader David Cameron as "a real breakthrough".
After a string of gains in key northern areas, Mr Cameron insisted: "We are now the party of the whole country, winning in every part of the country, winning against Labour, winning against the Liberal Democrats."
But Mr Blair, who will announce his resignation plans within days, insisted the results provided "a perfectly good springboard" for Labour to win the next general election.
Liberal Democrat leader Sir Menzies Campbell sparked speculation that his position was under threat by repeatedly declaring he would remain party leader into the next general election.
His party lost 246 council seats and relinquished control of four town halls.
