A spokesman said Blair wanted to show his support for Iraq's embattled government, which is struggling to reunite a country ravaged by a vicious sectarian war between rival Sunni and Shiite factions.

"We recognise that the challenges facing the government of Iraq today are huge and the prime minister wants to show his support to Prime Minister Maliki," the spokesman told reporters travelling with Blair.

"The prime minister will assure both Prime Minister Maliki and President Talabani that Britain will give primacy to the Iraqi government's views when considering any future deployment of British troops in Iraq.

"The discussions will also touch on Operation Sinbad in which British and Iraqi troops are working to rid neighbourhoods of Basra of insurgents," the spokesman added.

There are 7,100 British troops in the southern Iraqi city of Basra as part of a US-led coalition.

British authorities had imposed a news blackout on journalists travelling with Blair to keep his movements secret for security reasons.

Blair is facing increasing pressure at home over the war in Iraq following a report by an independent US panel that urged his top ally, US President George W. Bush, to change course.

The Iraq Study Group report published earlier this month urged Bush to drop his open-ended commitment to Iraq, encouraged the administration to allow the Iraqis to assume more of the responsibility for their own security, and said Washington should set a goal of withdrawing combat troops by early 2008.

"We stand ready to support you in every way that we can so that in time the Iraq government and the Iraqi people can take full responsibility for their affairs," Blair, who is touring the Middle East, told a news conference.

The visit by Blair, Washington's closest ally, comes as President Bush is rethinking his Iraq strategy following the defeat of his Republicans in mid-term elections and in the face of mounting U.S. military casualties.

Blair defended London's plans for a gradual withdrawal of its 7,200 troops in the south, mostly in and around oil-rich Basra, as Iraq's fledgling security forces take over.

"This isn't a change of our policy," he said. "Don't be under any doubt at all. British troops will remain until the job is done."

Britain has transferred authority to Iraqis in two of the four southern provinces it took responsibility for after the U.S.-led invasion in 2003. It has said it is confident it can hand over Basra to the Iraqis early next year and hopes to have brought thousands of troops home by the end of 2007.

"SADDAMISTS AND TERRORISTS"

Blair, on his sixth visit to Iraq since the 2003 invasion and with his legacy tarnished by Iraq, told reporters in Baghdad the bloodshed was being carried out by "Saddamists and terrorists" and appealed to Iraq's neighbors for help.

He later told British troops in Basra the conflict was now "about different groups of the local population fighting each other." Washington and London say Iraq is not in a civil war but other leaders, including former U.N. Secretary General Kofi Annan, say Iraq is in a civil war.

Those snatched in the mass kidnapping in central Baghdad included Red Crescent employees, visitors and guards. Witnesses said gunmen arrived in pickup trucks. "They took all the men, separated them from the women and left," a witness told Reuters.

"We call for their immediate and unconditional release," said Antonella Notari, spokeswoman for the International Committee of the Red Cross (ICRC) in Geneva.

She said at least 25 people had been taken by gunmen from among staff and visitors. ICRC carries out much of its work in Iraq through the Red Crescent. No ICRC personnel were snatched.

The Iraqi Red Crescent, the only Iraqi aid agency working in Iraq's 18 provinces, has 1,000 staff and 200,000 volunteers.

Baghdad is plagued by daily kidnappings, many of which are carried out by armed groups on either side of the conflict between majority Shi'ites and minority Sunni Arabs.

Maliki's Shi'ite-led government is under pressure from Washington to do more to stem daily violence that U.N. officials estimate kills more than 100 people a day. The violence has complicated U.S. and British plans to withdraw their troops.

The U.S. military plans to speed up the training of Iraq's army by tripling its number of embedded trainers to about 9,000, while keeping a close eye on units' sectarian loyalties, U.S. Brigadier General Dana Pittard said on Sunday.

The violence in Iraq since the invasion has marred Blair's final years in office, dividing the British public and his party, hurting his popularity ratings and reducing Britain's credibility in the region, analysts say.

Only last week, Defence Secretary Des Browne was forced to apologise to MPs after a leaked document showed that he had misled the House of Commons about plans to axe allowances to British soldiers serving in war zones.

Earlier this month, General Sir Mike Jackson, the former head of the Army, said that he warned ministers about the extreme danger of the Afghanistan expedition, exposing as a piece of tawdry spin John Reid's remarks that he hoped our soldiers would return 'without a shot being fired'.

Tony Blair's promise that our underequipped Armed Forces would be provided with whatever they needed to fight their battles is another pledge that turned out to be fabrication.

But ministers do not lie just about foreign affairs. Last month, in an astonishing statement, a High Court judge rebuked Northern Ireland Secretary Peter Hain for 'lack of candour to the court' with reference to a sensitive case involving a controversial political appointment designed to appease the Democratic Unionists.

This was a very grave allegation, and particularly shocking directed at a Cabinet minister. In a government of principle, this would have been a resignation matter.

Over the summer, the Deputy Prime Minister, John Prescott, was caught out making misleading statements about his connection with the U.S. gambling tycoon Philip Anschutz, while the former Home Secretary, David Blunkett, was exposed as a serial liar on a scale that might impress even Mohamed Al Fayed.

But nothing comes close to the events of last Thursday. These will, I believe, come to define the final, ghastly months of the Blair administration in the same way that Black Wednesday defined John Major.

It was a day that contained a series of momentous events: the bombshell (and very welcome) decision to drop the Serious Fraud Office investigation into whether BAe Systems paid £60 million in 'backhanders' to win a lucrative weapons deal with Saudi Arabia; publication of Lord Stevens' report into the death of Princess Diana; and the police interview with Tony Blair as part of the 'cash for peerages' inquiry - the first time that a serving Prime Minister has ever been interviewed as part of a police investigation.

Anyone familiar with the workings of Tony Blair's Downing Street and its careful manipulation of the political agenda by use of a diary grid system, which enables future news events to be charted and orchestrated, will spot a familiar pattern here.

The Prime Minister's aides chose the date of the interview - intriguingly, police sources have stressed that the timing was left up to Downing Street - because they knew that it coincided with the Diana report and the news would be partly 'buried'.

Downing Street officials, however, maintained that it was purely a coincidence that the two events took place on the same day. The trouble is that No 10 has misled the public so often that it no longer has the right to be believed.

Scepticism is all the greater because No 10 also lied, several times, during the course of Thursday. The first falsehood was uttered early in the morning, when Joe Murphy, the political editor of the London Evening Standard, rang Dave Hill, the Downing Street director of communications, to check a rumour that the police were set to interview Tony Blair that day.

Hill replied: 'Look, nothing is happening. I think that's pretty unequivocal.'

At 11 am, at the meeting of the Parliamentary Press lobby, the Prime Minister's official spokesman, Tom Kelly, was asked whether the police had been in touch. He replied: 'Nothing new to report.' But at the very moment he was speaking, the police were inside Downing Street quizzing the Prime Minister.

This astonishing and successful attempt to mislead journalists follows a long line of examples of the Government systematically lying to the Press and public about the cash-for-peerages crisis.

I know of cases where reporters have phoned No 10 to ask whether certain officials had been interviewed by the police. They have been told 'No' - and then discovered that they had, in fact, been questioned.

Another gross act of deception came in the form of a press release put out by the Labour Party on November 28 - the day that the Electoral Commission, an independent watchdog, published a document on party finances.

Yesterday, I asked Downing Street's Dave Hill to explain his conversation with the political editor of the Evening Standard early on Thursday morning. 'I knew nothing. I did not know anything. I did not know that the police were expected at the time,' he said.

I told him that I was prepared to accept his comments (although only with some reluctance, for since he is one of the three or four most senior figures at No 10, and, being director of communications, he would be expected to be consulted about the timing of a major event like the arrival of the police).

But his answer raised a further question. If he was, indeed, in this blissful state of ignorance, why didn't he just say he hadn't a clue what was going on? Hill seemed incapable of answering this question.

The horrible truth is that Thursday's episode is simply the latest in a line of evasions, lies, falsehoods and even smears to issue from Dave Hill and his colleague Tom Kelly - the man who so callously denounced Dr David Kelly as a 'Walter Mitty character'.

Yet I have known Hill for 15 years and know him well enough to be sure he is a fundamentally decent man. He went into Downing Street three years ago with a high reputation - but that is vanishing fast.

Before ending our phone conversation, I told him that he would be foolish to destroy his own integrity on behalf of Tony Blair, a man who - whatever the result of the current police investigation - is now certain to go into history as one of the most disreputable, duplicitous and dishonest Prime Minister in British history.

The disclosure shows that the investigation has widened to include a suspected cover-up by those around the Prime Minister. Until now, it has centred on the £14 million in secret loans made to the Labour Party by millionaire supporters.

A prosecution source said: "There is more than a suspicion that evidence has not been handed over, people have colluded and the police are not being helped.

"It has been noted that when the Watergate scandal forced President Nixon to resign, it was the cover-up, not the burglary, that brought him down. What these people should remember is that they are not dealing with a parliamentary inquiry; this is a criminal investigation and anyone failing to co-operate is participating in a criminal offence."

Up to this point the charges being considered come under the Honours (Prevention of Abuses) Act 1925, which makes it an offence to take money as an inducement or reward for procuring an honour, and the Political Parties, Elections and Referendum Act 2000, which restricts the sources of donations.

The possibility of charges on perverting the course of justice was discussed by CPS lawyers after meetings with police. Such charges can be brought if a person tries to interfere with an investigation that might bring criminal proceedings. The charge, which carries a maximum life sentence, was used against Jonathan Aitken and Jeffrey Archer. According to the CPS, "it does not matter whether or not the act results in a perversion of the course of justice: the offence is committed when acts tending and intended to pervert a course of justice are done".

The news that Labour figures are being investigated for alleged offences going well beyond the initial scope of the cash-for-honours inquiry will come as a bombshell to the party. Were charges to be brought, the issue could dominate politics for months, if not years.

Labour had been hoping that the investigation and any resulting action would be over before Mr Blair leaves office, giving Gordon Brown, almost certain to be his successor, a chance to make a fresh start. Charges as serious as perverting the course of justice could mean that the party will have a cloud hanging over it for much longer.

The police inquiry began in March after the House of Lords rejected nominations for four millionaire backers - Chai Patel, Sir Gulam Noon, Sir David Garrard and Barry Townsley - whose names were put forward by the Prime Minister for peerages. A team of eight detectives based in Scotland Yard has interviewed at least 90 people and set a timetable of "early 2007" to submit a final case file to the CPS.

Of those interviewed, 35 were from Labour, 29 from the Conservatives and four from the Liberal Democrats. The remaining 22 were leading civil servants in the Cabinet Office and Downing Street, or nonpolitical company directors.

Three people have been arrested as part of the inquiry. They are Lord Levy, the Prime Minister's personal fundraiser, Des Smith, a government adviser, and Sir Crhistopher Evans, the biotech tycoon who lent Labour £1 million. They deny any wrongdoing. No one has been charged in the inquiry.

On Thursday Mr Blair became the first serving Prime Minister to be interviewed by police undertaking a criminal inquiry. He was not questioned under caution. This newspaper revealed on Saturday that his evidence contradicted that of his close friend, Lord Levy, who will now be interviewed again.

After the interview Mr Blair defended his decision to nominate the four Labour businessmen by claiming that they were nominated for services to the Labour Party. His claim has been contradicted by key documents leaked to a newspaper this weekend that show that they were nominated for services to education, health or charities, not to the party.

Others who will also be quizzed for a second time include Jonathan Powell, No 10's Chief of Staff, Ruth Turner, director of government relations, and John McTernan, director of political relations. All three are known to have denied any wrongdoing. The Times revealed last month that Mr Powell, Blair's most trusted aide, will now be questioned under caution.

# Downing Street has dismissed an alleged internal memo suggesting that the Government was seen as a "shambles". The paper, disclosed by The Mail on Sunday, expressed concern that the party was viewed as riven by internal conflicts and lacking "grip and competence on vital issues". The author was not named and No 10 said: "This is not a Downing Street memo."

He also ducked questions over claims Downing Street had tried to smear Gordon Brown by sucking him into the peerages scandal.

The row escalated amid mounting pressure on Lord Levy following the discovery of a notebook belonging to Labour donor Sir Christopher Evans, who has been arrested as part of the investigation.

Sir Christopher's notes, which refer to Levy, suggest he was asked if he wanted 'a k (knighthood) or a big p (peerage)'.

The note was discovered by police during interviews with other witnesses who were asked if they had had similar conversations with Labour fundraisers.

Sir Christopher, a biotech tycoon who was knighted in 2001 and made a £1million loan to Labour before the 2005 Election, has told friends he has had repeated approaches from Labour figures about a peerage.

"I have lost count of the number of times people have said to me 'You are just the kind of guy we would like to see in the House of Lords'," he told one colleague.

A spokesman for Sir Christopher said the note had nothing to do with the current investigation as it was a "casual" observation made years ago.

Unlike four other businessmen who lent Labour £1 million, Evans was not recommended for a seat in the Lords.

When the peerages for the four others were challenged in October 2005, it was disclosed that Sir Christopher's firm, Merlin Bioscience, was involved in a Serious Fraud Office probe.

In the Middle East, Mr Blair refused to be drawn into the row, saying tetchily: "I have got absolutely nothing to say on that issue.

"I am concentrating on this visit on the issues I shall be raising in respect of Israel and Palestine."

When invited by reporters to give his backing to Lord Levy in his role as Middle East envoy, Mr Blair declined, saying: "I am afraid, no matter how many different ways you might want to draw me into it, I am not getting drawn into it."

Later, on the flight from Ankara to Cairo in Egypt, the Prime Minister's official spokesman, while acknowledging the controversial peer retains his envoy job, made it clear No 10 was keeping its distance.

He said: "I do not brief on Lord Levy. He can speak for himself."

Mr Blair is due to spend almost a week in the region visiting Israel, the Palestinian Authority and the United Arab Emirates.

He hopes to kick-start the peace process, stalled since the kidnapping of two Israeli soldiers in the summer.

But with Lord Levy looking increasingly "detached" from No 10, insiders have raised serious doubts about what positive effect Mr Blair's visit can have.

The rift between Mr Blair and his fundraising former tennis partner has been steadily widening as the police investigation proceeds.

It has been reported that when the Prime Minister was quizzed by police last week, his account differed significantly from the one offered by Levy during his arrest and questioning earlier in the year.

Mr Blair's mission was further compromised while he was in the air on his way to Egypt, when Palestinian President Mahmoud Abbas suddenly called fresh elections.

The move risks pushing popular extremist party Hamas, which won the last ballot, back on a path of terrorism.

But in Cairo, Mr Blair was optimistic. He said: "The door is open to Hamas. I never believe in giving up in these situations."

The memo also apparently warns that the position of Mr Blair's likely successor, Chancellor Gordon Brown, is "eroding" against David Cameron's "increasingly acceptable" Tories.

It is said to insist that the party is running out of time to avoid electoral disaster.

A spokesman for the Prime Minister said: "This is not a Downing Street memo, it was not written by any of the Prime Minister's staff and it most certainly does not reflect his views."

Downing Street sources also insisted the memo had not been prepared by any of Mr Blair's special advisers or other Labour Party-funded staff in his personal office.

The confidential document states:

- Labour's standing is so low that the party's only hope of recovering may be to abandon Mr Brown and 'move to a new generation' by picking a much younger new leader - though it warns of the perils of being 'disloyal' to the 'greatly respected' Chancellor.

- The public believes the party is riven by 'internal conflicts' and shows a 'lack of grip and competence on key issues' such as Iraq, the NHS and immigration.

- People who voted Labour at the last Election 'are moving across' to the Conservatives and Labour is floundering 'on every major issue'.

- Mr Blair faces a 's*** or bust' decision on how to stop the rot.

The leak came as a vicious new war of words flared between the rival Blair and Brown camps over where blame for the cash-for-peerages scandal lies.

Mr Brown angrily accused Mr Blair's chief fundraiser Lord Levy of trying to 'smear' him over claims the Chancellor did not tell the truth about nominating two of his cronies for peerages.

And Mr Blair's allies responded by claiming the Prime Minister believed Mr Brown had 'fanned the flames' of the row over party funding to bring down his Downing Street neighbour. "It is outrageous for Brown to play the innocent,' said one. "No one demanded more money than him - and he knew where it was coming from."

The Mail on Sunday has also learned that Mr Blair has held secret talks with his chief of staff Jonathan Powell, at which they agreed that the Prime Minister's final six months in office must create a 'leadership legacy' which sets him apart from Mr Brown.

The Prime Minister has privately mocked Mr Brown's prospects as Prime Minister, saying: "The trouble with many of Gordon's ideas is that they butter no parsnips."

The memo, written in the past few weeks, is the most damaging Government leak in years.

It was written by one of the Prime Minister's closest advisers and seen by a handful of senior figures, including Mr Blair.

It makes a nonsense of public claims by Labour that Mr Blair is planning a smooth transition to Mr Brown next June or July as part of a carefully co-ordinated strategy to secure a fourth successive Election victory.

It also flatly contradicts Mr Blair's public statements dismissing Mr Cameron as a lightweight with no chance of winning power.

In private, Mr Blair's inner circle is in a blind panic over the march of Mr Cameron's Conservatives, and they don't think Mr Brown is any match for him.

The memo freely acknowledges Tory gains in the polls since Mr Cameron replaced Michael Howard, with big leads on tax, crime and immigration. "Labour no longer has a measurable lead on any major issue,' it states.

And it confirms Opposition claims that the Government has failed to live up to its promises and that it is haemorrhaging support as a result of the Iraq War.

"The Government is seen as a shambles. It is not just Labour internal conflicts but a lack of grip and competence on key issues. Iraq is a potent and raw issue, so is the NHS, immigration and crime. We have lost control of the big issues and are not delivering,' the memo states.

Nor is the trend likely to change. "This view is deeply held and entering the bones of the electorate. The public are clearly preparing to shift to the Conservatives if they prove themselves credible and likable."

It would be wrong to assume this is some kind of mid-term setback. It is not. It is a long-term cyclical shift towards an increasingly acceptable Opposition. People who voted Labour in 2005 are on their way across."

Mr Blair's advisers believe Mr Brown's position as Labour heir apparent is making things worse. "Compounding this is an erosion in Gordon Brown's position against David Cameron," the memo says.

Extraordinarily, the document reveals that No10 actively contemplated dumping Mr Brown in favour of a younger successor.

"We can rally round...or we can go for total renewal, moving to a new generation, effectively forming a new government while still in power."

It does not name the potential alternative successors but it is no secret that Mr Blair once hoped Environment Secretary David Miliband would mount a challenge against Mr Brown.

Similarly, despite being slightly older than Mr Brown, Education Secretary Alan Johnson, a relative Cabinet newcomer, was also seen as a way of providing a 'break with the past'.

But the memo warns this tactic could backfire: "Trying to completely renew in office may look as if we are trying to cheat time. And worse - that we are disavowing our record in government.

"Gordon Brown is part of our record. If we disown him, we run the risk of disowning our record. The public will recoil from evidence of disloyalty towards Gordon.

"Whatever people think of him as a [potential] Prime Minister, they still greatly respect him as a Chancellor."

But it shows Mr Blair has serious doubts about allowing Mr Brown to take over without a leadership contest.

The public are 'not stupid', says the memo. "They will not forgive us if we foist an unpopular leader on them without a proper democratic process. They just won't accept it."

It finishes on a note of desperation. "We have to focus. We can't sort out everything. The NHS is probably the best place to start. If we can make sense of one or two areas of policy the rest might fall into place. This is really s*** or bust time."