Short hints she may not quit as fears of Labour revolt ease

Clare Short prepared the ground yesterday to withdraw her threat to resign from the Cabinet over Tony Blair's strategy on Iraq.

In a surprise move, the International Development Secretary said she was feeling "more optimistic" about the Iraq crisis after holding talks with the Prime Minister at Downing Street.

Her apparent change of heart came only five days after she attacked Mr Blair's approach to Iraq as "reckless" in a BBC Radio 4 interview. The Prime Minister was furious about her outburst and close allies believe he had decided to sack her if she did not carry out her threat to resign in the event of Britain failing to win a new United Nations resolution on Iraq.

However, Mr Blair may now judge that allowing her to remain in the Cabinet will help to quell the Labour rebellion over Iraq in a crucial Commons vote expected next week. He may defer a decision about her future until the Iraq crisis is over.

Mr Blair informed her that the American President, George Bush, would soon publish his "road-map" on the Middle East peace process, as he duly announced three hours later. She also felt more upbeat on two other issues on which she expressed concern last weekend – the prospects of a second UN resolution and for the UN to play a key role in the reconstruction of Iraq after a war.

Ms Short said: "I had a very good meeting with the Prime Minister. We discussed the three points I set out last week as being of vital importance on Iraq. I feel more optimistic that progress is being made.

"I am delighted that the US has shown it is committed to the Middle East peace process road-map and I welcome this important development." She hoped that progress could continue to be made on a UN resolution and the UN's role in a post-war Iraq.

Last night friends denied that Ms Short had performed a U-turn, saying her "bottom line" remained progress on the two outstanding issues and she would "wait and see" what happened before making a final decision about her position. But they confirmed that she was more optimistic than when she gave her radio interview.

Downing Street said only that the meeting discussed plans for a humanitarian relief effort in Iraq. Blair aides will be relieved at Ms Short's change of mood. If she decides to stay, it could prevent some junior ministers resigning from the Government. But it is unclear whether Robin Cook, the Leader of the Commons, would quit. At Thursday's Cabinet meeting, he left other ministers with the firm impression that he would resign in the absence of a new UN resolution.

In another ray of optimism for Mr Blair, there were signs yesterday that the rebellion against him in the Commons may be smaller than expected. Last month 121 Labour MPs voted against the Government and the party's whips feared that another 50 could join them if the Prime Minister sought backing for a war without a fresh UN mandate.

But ministers now hope that next week's revolt may be similar in size to last month's. Whips have reported that several MPs who intended to oppose Mr Blair have been won round by the Government's campaign to blame France for scuppering the efforts to reach agreement at the UN. At least two of the 10 Parliamentary Private Secretaries who have threatened to resign are now having second thoughts.

Other factors which may stem the rebellion include demands by the hard-left Campaign Group for a leadership challenge to Mr Blair, which has alienated some anti-war MPs. Some waverers may back Mr Blair reluctantly because they are worried that he could be ousted from office by the Iraq crisis.

But rebel MPs insisted the revolt was remaining solid and dismissed the more upbeat noises coming from ministers as "wishful thinking."

Charles Kennedy, leader of the Liberal Democrats, said his party remained opposed to war without a new UN motion and rejected Government claims that France was acting "unreasonably" by threatening to veto any fresh resolution. "They are reflecting a large strand of international opinion," he said.

Speaking at the start of his party's spring conference in Torquay, Mr Kennedy stressed that the Liberal Democrats would unite behind British troops if they were sent into battle.