No wonder Tony Blair is losing the will to fight on - things can only get worse for him

The Prime Minister can survive the Butler report. But it may be a further decline into moral degradation

It is an extraordinary state of affairs. Here is a government which has had a huge majority for seven years, led by one of the master political tacticians of all time. Though there have been a few bumps and scrapes lately, Tony Blair's position is vastly stronger than Margaret Thatcher's was in 1990, before she was deposed. To put it at its most pessimistic for the Labour Party, does anyone believe that Tony Blair has no chance of winning the next election?

It is an extraordinary state of affairs. Here is a government which has had a huge majority for seven years, led by one of the master political tacticians of all time. Though there have been a few bumps and scrapes lately, Tony Blair's position is vastly stronger than Margaret Thatcher's was in 1990, before she was deposed. To put it at its most pessimistic for the Labour Party, does anyone believe that Tony Blair has no chance of winning the next election?

Yet over the past few weeks, he has turned into a political invalid. Five cabinet ministers had to implore him not to resign. In the midst of electoral success, he has become a diminished, self-doubting figure. In the absence of a lethal threat from the Tory front bench, he seems determined to summon up demons from his own psyche.

This is curious. Prime Ministers normally have to be dragged out of office by defeat, overwhelming failure, irresistible revolt or ill-health. No PM has behaved in this way since Lord Rosebery in the 1890s and, he and Tony Blair seemed to have nothing in common except their Edinburgh origins. But Rosebery had a streak of narcissism, as does Tony Blair. Rosebery never seemed happy in his skin when premier, which was not true of Tony Blair in earlier days. Things may have changed. Mr Blair may have realised that his golden epoch of easeful dominance is over and beyond recall.

There are also family stresses. No 10 is not designed for domestic life - though it is interesting that Cherie Blair is also begging her husband to stay in office. Most recent prime ministerial spouses, including the great Sir Denis Thatcher, were at best ambivalent about Downing Street. They were always ready to remind the Prime Minister that there were other ways to live. Cherie Blair really must detest Gordon Brown.

In reality, there is a political reason for the Prime Minister's crisis of morale. He has lost the battle of Europe, and he knows it. However much one doubts the sincerity of Mr Blair's convictions, Europe was an exception. He expected to win his place in history by reconciling the British people to a European destiny. Instead, he has merely proved that Jacques Delors is right. The British are allergic to Europe.

Mr Blair is still insisting that he can win a referendum on the EU constitution. Hardly anyone else believes him. I have recently spoken to a couple of distinguished Europhiles who have spent four decades conspiring against their country's independence. Both of them claimed that a referendum could be won. Then, in the next breath, they lamented Mr Blair's decision to hold one. It was an unconvincing juxtaposition, but Mr Blair will understand. He conceded a referendum because he feared the electoral consequences of refusing to do so. Yet if the voters might have been prepared to turn out a government, they will certainly turn down a constitution.

Tony Blair knows that he had a chance to vindicate the cause of Europe and that he let it slip away. Forget any adolescent hysterics at home: that is the real reason for his depression. He is looking at the empty place in history and he fears that the plaque will read: "Europe: Opportunity Lost".

If he is as sensitive to the vicissitudes of public opinion as he used to be, he will also be aware that his five colleagues did not only form up to him because they want him to go on and on. They did so because they do not want Gordon Brown.

In the early Fifties, when the Establishment could conceal things, a secret was kept. Everyone who had seen Anthony Eden at close quarters knew that he should not become PM. He was too febrile, too neurotic, too impossible. As Rab Butler put it: "Anthony is the child of a mad baronet and a beautiful woman. That's Anthony: half a mad baronet, half a beautiful woman." Eden did succeed Churchill, because he was the obvious candidate. Then every foreboding came to pass.

Today a lot of senior figures in the Labour Party take the same view of Gordon Brown as their Tory predecessors did of Eden. Yet they may be rescued by a chap called Tom Bower. Mr Bower is an assiduous writer who never minds being under fire. He has written honest biographies of difficult and powerful figures: Robert Maxwell, Tiny Rowland, Mohammed Fayed. Originally a man of the left, Tom Bower has come to loathe New Labour's dishonesty, and his life of Gordon Brown is shortly to be published. If it contains half the interesting stories about Mr Brown that I have heard, it will not be uncontroversial. We can also be certain that Mr Bower will have had help from Tony Blair's people. They are no longer so concerned about any overall damage to the New Labour project. They just want to stop Gordon.

Lord Butler does not want to stop anyone. He is a man who has spent four decades ensuring that the Queen's government is carried on, for which he was deservedly rewarded with a Knighthood of the Garter. Over the past few months I have read a lot of nonsense about Robin Butler being weak. He is as weak as cask-strength whisky.

He and his team did not set out to do down this Government. But they intend to vindicate the principles on which government should be conducted. That is bad news for Tony Blair, who does not understand the concept. So is the likely reaction to the report of a much-tried, diligent and honest public servant, John Scarlett.

In the run-up to the Hutton Report, Mr Scarlett insisted that he had done nothing wrong. A number of people were impressed by this because they knew him to be a man of the highest rectitude who judges his own conduct by the same rigorous standards that he used to apply to Soviet intelligence material.

Hutton cleared him, admittedly on narrow criteria. But if the version of Butler now being spun by No 10 is correct, the new report will be harsher in its judgement. If so, I suspect that John Scarlett will feel that he has no choice. A politician can plough on despite a shell-hole or two. "C"', the head of MI6, can only defend the integrity of his service if his own is unquestionable. If Hutton had found against him, John Scarlett would have resigned. If Butler does, will he have a choice?

Tony Blair believes that he does. There are strong rumours that the Prime Minister is begging John Scarlett to be gentler on himself. This is not because Mr Blair is overflowing with the milk of human kindness; merely that he realises the consequences of a Scarlett resignation. If Mr Scarlett goes because Lord Butler concludes that he did not do his former job properly, who was responsible for the impropriety? There can only be one answer: the Prime Minister, whose bidding he did.

Whatever the outcome for John Scarlett, Tony Blair can survive the Butler Report. But it may be a further decline into moral degradation: a further step downhill from the glorious place in history which he once wanted to win. No wonder he is beginning to lose the will to go on. There is increasingly little point in his doing so; nothing will get any better for him.