The issue of gay adoption seems to be peculiarly toxic in British politics. First it did for Iain Duncan Smith, marking the beginning of his demise as Conservative leader. Now it looks like doing the same for Tony Blair.

“Going, going, gone”, would be a good description of the Prime Minister’s authority. The atmosphere has changed markedly since Christmas. Mr Blair has taken to saying to colleagues “Well, I won’t be around for that”, when they discuss policy together. In return, they have ceased to defer to him.

Several ministers would have voted against any exemption for Catholic adoption agencies from the requirement to place children with suitable gay couples, had it come to the Commons. But there was no chance that it would. Mr Blair was forced to back down.

Even his closest consigliere, Lord Falconer of Thoroton, went on the airwaves to pronounce that no exemption was possible. Such an act would have been unthinkable a few months ago. The Lord Chancellor might have disagreed privately with the Prime Minister, but he would not have made it public. “Tony’s weakness is the issue now,” admitted a senior Cabinet minister yesterday. “You need somebody at the helm.”

Some also criticise the way the controversy has been handled. It was never discussed in Cabinet committee, let alone in full Cabinet. “Government by sofa?” I ventured to a minister yesterday. “More like government by taking fright, I’m afraid,” was the reply.

The last time the State allowed itself to be overruled by the Church, over the percentage of non-believers allowed into faith schools, there was deep resentment among Labour MPs. It looked as if the Government was caving in under pressure. They were not going to allow this to happen again — and particularly when the Church concerned was Catholic.

The amount of vitriol being whispered in Westminster corridors this week shows how shallowly buried are the old prejudices. “I’m not going to have some bloody reactionary German Pope dictate the law of our land,” said one minister. Another admitted, only half-jokingly, that his mother had always told him: “Never trust a Catholic.” And a third asked: “Where’s all the child abuse and paedophilia? In the Catholic Church. They should get their own bloody house in order and sort out the way paedophilia lies hidden.”

But this is not a strict division between Catholic and non-Catholic MPs. John Hutton, for instance, the Work and Pensions Secretary, is Catholic but he opposed the idea of the agencies being exempted from the law. Mr Blair is not Catholic, but often behaves as if he is.

Many Labour politicians now believe that the Church-State relationship should change. Expect the position of Anglican bishops in a reformed House of Lords to be more precarious than now. As one minister puts it: “We’re getting a sense of victimhood from the Church. But look at the House of Lords! They’re the Established Church. If they’re going to make what look like unreasonable demands, it’s going to be difficult.”

Oddly, had the Catholic position been more hardline, it might have stood more of a chance. But once Vincent Nichols, the Archbishop of Birmingham, admitted on Tuesday’s Newsnight that his agencies were happy to place children with single gay people, but not couples, his argument fell apart. Surely two parents are better than one? If single homosexuals are acceptable, why not a couple committed to each other? The widespread view was that he couldn’t have it both ways: either homosexuality was wrong or it wasn’t. Equally, Catholic agencies are prepared to place children with cohabiting heterosexual couples, even though the Church disapproves of sex before marriage. As one Cabinet minister put it: “If there was a religious principle at stake here, they sold the pass several years ago.”

The Department for Education, which is in charge of adoption, is convinced that a short transition period — say six months — would be ample to ensure that no child in the system suffered if any agencies did in fact close. Those on the other side of the argument believe it needs to be measured in years, not months.

The more liberal ministers claim that the disruption will, in practice, be minimal. People working for Catholic agencies will probably switch to secular ones. And anyway, the chances of a gay couple suing a Catholic agency and winning are vanishingly small. As long as the agency followed correct procedures, kept proper records and concluded that a placement was not in the best interests of a child, a court would be extremely unlikely to find against it.

So the best solution would be for the Catholic agencies to accept a transition period and begin quietly, perhaps in a secular guise, to accept the new law.

Will there be other political repercussions, though? Already MPs are murmuring again that Mr Blair should set out a timetable for his departure, as if that would settle matters. It won’t. We already know that he will be gone by October and, much more likely, the summer recess. Authority is hardly going to flow back to him if he announces an exact date.

There are still, though, the Scottish elections in May. The sectarian divide is greater there than in England. When two new Scottish MPs sit down together for the first time at Westminster, the first thing they ask each other is where they went to primary school — the easiest denominational marker.

Which is why, perhaps, Gordon Brown has said nothing publicly, or even privately to his colleagues, about the gay adoption issue. When asked by my colleague, Greg Hurst, what his opinion was, the Chancellor’s office replied: “That’s not a matter for the Treasury, as far as I’m aware.” Mr Brown is prime ministerial when he wants to be, but his instinct to run away from toxic issues is as strong as ever.

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