Tony Blair accepted today that his announcement that he will quit Downing Street before the next election has backfired because it has failed to quell speculation over his future.

The Prime Minister admitted that the move may have destabilised him and left him open to calls for him to go. His remarkably frank admission in a radio interview with the Australian Broadcasting Corporation comes as Mr Blair faces increasing attack over the cash-for-peerages affair and the crisis in the National Health Service caused by deficits within trusts leading to layoffs and bed closures.

Asked whether his decision to leave office had left him more vulnerable to calls for his resignation, Mr Blair said:

"I think what happens when you get into your third term and you are coming up to your tenth year is that it really doesn’t matter what you say. You are going to get people saying it should be time for a change or ’When are you going?’ or ’Who’s taking over?’"

But Mr Blair acknowledged that his statement, made in September 2004, that he would not serve a fourth term had "been an unusual thing for me to say. But people kept asking me the question so I decided to answer it. Maybe that was a mistake."

Downing Street moved quickly to clarify the Prime Minister's comment, saying that he did not regret announcing that he would leave office before the next election, only that he had mistakenly believed it would reduce speculation about his future.

"Some people may think it was a mistake. He doesn’t," said Mr Blair's official spokesman, who is accompanying the Prime Minister on his trip to Australia, New Zealand and Indonesia this week.

Mr Blair's interview drew immediate calls from Conservatives and Liberal Democrats for him to clarify what Sir Menzies Campbell, the leader of the Liberal Democrats, called his "exit strategy".

"His admission in Australia has only added to the current uncertainty and sense of drift," said Sir Menzies. "The issue now is not the interests of the Labour party but the good governance of Britain."

David Cameron, the Tory leader, said the doubt surrounding the future of the Prime Minister was damaging the country.

"At the moment we have got a Prime Minister desperate to stay, a Chancellor desperate for him to go and a Cabinet who do not know whether to follow the leader today or wait for the leader tomorrow, and as a result we have got bad government," he said.

Mr Blair is known to have a leaving date in mind, but is keeping his closest aides guessing. Ministerial friends say that the Prime Minister is still in no mood for an early departure and that he will not go while the NHS, the Labour Party’s biggest achievement, is in difficulty.

He is known to be exasperated by the row over his party taking loans. Those in his inner circle call the row "ghastly" and accept it will drag on, with a Commons committee this week beginning an inquiry.

Lord Levy, the fundraiser at the centre of the row, has agreed to give evidence to the Public Administration Committee but made clear yesterday he would not use his appearance in May to criticise Mr Blair.

Friends said that Lord Levy would tell MPs that Mr Blair had been involved in the decision last year to seek loans as well as donations, but that it had been taken with three other people — Matt Carter, the party’s general secretary, Ian McCartney, the chairman, and himself. They flatly denied reports that Lord Levy blamed Mr Blair for the whole row and would make sure that he was not made the "fall guy". Lord Levy will remain as fundraiser until Mr Blair steps down.

MPs on the Public Administration Committee meet this evening to discuss the terms of the inquiry, and Labour members will press for the investigation to be broadened to cover the Conservatives. That would mean Jonathan Marland, the Tory party treasurer, and Lord Ashcroft, the most generous donor, being called to give evidence, and would increase pressure on the Tories to make public the names of its lenders.

Mr Blair, The Times understands, has been prompted by the row to change his position on House of Lords reform. Having opposed an elected or even part-elected second chamber, Mr Blair is now open to both. He has told ministers to produce proposals later this year.

The indications from the Blair circle suggest that he has no intention of going this year, and reinforce the Westminster feeling that 2007 could be the handover year.

‘If I’m elected I would serve a third term. I do not want to serve a fourth term. I don’t think the British people want a Prime Minister to go on that long but I think it’s sensible to make plain my intention now . . . If the British people — it’s their decision — if they elect me, I feel I’ve still got lots more to do and to give, then I want to serve the third term. But I think it’s sensible now to say, frankly, I would not go on and on and on to serve a fourth term.'
Tony Blair, September 30, 2004

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