By William James

LONDON (Reuters) - Sadiq Khan of opposition Labour Party is the strong favourite to win London's mayoral election on Thursday after a contest marked by religious tensions and accusations of racism.

Polls show Khan, the son of a bus driver, is as much as 20 percentage points ahead of rival Conservative Zac Goldsmith in the race to run one of the world's top financial centres. If he wins, he will succeed current Conservative mayor Boris Johnson to become the first Muslim to head a major Western capital.

London's population of 8.6 million is among the most diverse in the world and it is rare for identity politics to enter British campaigning.

But Goldsmith, with the support of Prime Minister David Cameron, has for weeks focused on Khan's faith and past appearances alongside radical Muslim speakers, accusing him of giving "platform, oxygen and cover" to extremists.

Former human rights lawyer Khan says he has fought extremism all his life and regrets sharing a stage with speakers who held "abhorrent" views.

He has accused Goldsmith, the elite-educated son of a billionaire financier, of using Donald Trump-style tactics to divide Londoners along faith lines, as well as being part of an out-of-touch wealthy elite.

"There's a chance that there are people who are almost subconsciously put off (voting for Khan) by the dog-whistle racism ... people who wouldn't like to say 'I'm not going to vote for Sadiq Khan', but will have a wobble at the ballot box," said Anthony Wells, director of political and social opinion polling at YouGov.

The impact was unlikely to be enough to allow Goldsmith to pull off a surprise victory, he said.

"The only effect of the Zac Goldsmith campaigning is probably just to entrench all those long-standing issues the Conservative Party have got with appealing to ethnic minority voters," he said.

Last week the campaigning took a new twist as Kahn's party was accused of failing to stamp out anti-Semitism in its ranks amid a row over comments by another lawmaker on her Facebook account saying that Israel should be moved to the United States.

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Khan condemned the comment and distanced himself from former London mayor Ken Livingstone, who on Thursday was suspended from the Labour party for supporting the party member at the centre of the controversy.

He said on Sunday the anti-Semitism row, fuelled by comments made by Livingstone linking Hitler with Zionism, could hit his chances in the election.

"I accept that the comments that Ken Livingstone has made makes it more difficult for Londoners of Jewish faith to feel that the Labour Party is a place for them, and so I will carry on doing what I have always been doing, which is to speak for everyone," he told The Observer newspaper.

The left wing of the party -- and notably its current leader Jeremy Corbyn -- have long been sympathetic to the Palestinian cause and it is not the first time Labour has faced accusations that this had led to actual anti-Semitism.

Corbyn is likely to face new questions over his future if the party does poorly in the election.

SOFT POWER

The two mayoral hopefuls also have opposing stances on whether Britain should remain a member of the European Union. Goldsmith wants to leave, Khan wants to stay.

But even with a June 23 referendum on that issue looming, and the question over London's role as a global financial centre that a vote to leave would pose, the Brexit issue has barely featured in the campaign.

Both candidates have been eager not to alienate voters who disagree with them on Brexit, saying they will fight for the capital's interests whichever way the country votes.

Otherwise, their policies for the city are largely similar - more affordable housing, more transport investment and better local policing.

It is the political influence that comes with the post, the second-largest direct electoral mandate of any politician in Europe, that is perhaps most at stake.

"The soft power of the role is very important," said Tony Travers a professor at the London School of Economics. "The mandate of a city as big as London gives the mayor a voice and authority which goes well beyond that formal mandate."

(Additional reporting by Paul Sandle, Editing by Giles Elgood and Mark John)