Education reforms 2006

The introduction of further reforms to the education system, which restricted the involvement of local education authorities in opening new schools, proved controversial. Labour backbenchers opposed to the proposals produced a rival manifesto, and the Bill to introduce the changes was delayed while the government negotiated with them. The Conservative Party declared its support for the reforms, making passage certain but increasing the likelihood that Labour MPs would vote against them. On 15 March 2006, the Education and Inspections Bill passed its second reading, with 52 Labour MPs voting against; had the Conservative Party also voted against it would have been defeated.

Debate over Muslim women wearing veils

A debate over Muslim women wearing veils developed after Leader of the Commons Jack Straw said he asked women in his constituency to remove them when they visited him. The Prime Minister believed that this was a "mark of separation" and made some "outside the community feel uncomfortable". He also backed Kirklees Council, which suspended a classroom assistant Aishah Azmi for refusing to remove her full face veil at school.

Resignation as Labour Party leader and Prime Minister

After Labour's 2004 conference, on 30 September 2004, Blair announced in a BBC interview that he would serve a "full third term" but would not fight a fourth general election. No term limits exist in British politics, and such an announcement was historically unprecedented. Blair said he would give "ample time" for his successor to establish himself before the next general election, likely to be held in 2009 or 2010.

Following the 2005 election, there was constant speculation over the date of Blair's departure. At Westminster, he was expected to retire after the proposed UK referendum on the European Union Constitution, but the constitution being thwarted at referendum in other countries negated any need for one in the UK (such a major issue as a union-wide constitution would require unanimity amongst the EU's member states). The July 2005 terror attacks also reduced the likelihood of an early departure. Speculation as to the likely timing of Blair's departure increased in May 2006, following Labour's poor results in English local elections.

On 5 September 2006, a letter signed by 17 Labour MPs called for Tony Blair to resign. On the same day 49 other Labour MPs signed a statement supporting Blair's departure timetable. 

On 7 September 2006, Blair announced that the 2006 Labour Party conference would be his last as leader (in other words, he planned to resign by September 2007). He did not announce a specific timetable for either his departure or the election of a new leader, but he did state that he would "set a precise date" at some point in the future. On 26 September 2006, he restated this at Labour's annual conference "this is my last conference as leader".

On 24 November, Tony Blair addressed the Scottish Labour conference as Labour Party leader and Prime Minister for the last time.

On 2 May 2007, Tony Blair announced that he would be stepping down as Prime Minister in a matter of weeks. He encouraged Gordon Brown as his successor as leader of the Labour Party. On 3 May, it was further clarified by Downing Street that the exact date of resignation would be announced on 10 May. The following election of a new leader of the Labour Party was expected to take 48 days.

On 10 May 2007, Blair held a Cabinet meeting where he told his ministers about his resignation plans and later making a speech at the Trimdon Labour Club in his Sedgefield constituency before announcing at a press conference that he would step down as Prime Minister on 27 June 2007 and that he would be asking the NEC to begin seeking a successor as Labour leader immediately.

Gordon Brown was duly elected Labour leader as the only successfully nominated candidate with 313 nominations compared to John McDonnell's 29 at close of nominations on 17 May 2007, the result being declared formally and coming into effect on 24 June 2007 with Tony Blair resigning as Prime Minister on 27 June 2007 and Gordon Brown being asked to form a government by the Queen later that day. Blair stepped down as an MP immediately triggering a by-election. He has declined the traditional seat in the House of Lords offered to former prime ministers, commenting that it is, "...not my scene".