Mr Blair has a good case, but he will still lose

There is irony in the Kelly affair as well as tragedy; nemesis as well as hubris. Mr Blair seemed to have achieved a public relations triumph even by his standards. He had been applauded in Washington, while deftly moving the debate on the Iraq war from the narrow ground of weapons of mass destruction to the sunlit uplands of historical vindication. But he was not the only man with access to history. In a field in Oxfordshire, a tortured soul was preparing to enter his name in history and to blow the Prime Minister's presentational triumph out of the sky.

As a result, the Government is in grave difficulty. The Prime Minister's reputation has been tainted and the same is true of Alastair Campbell, on whom Mr Blair is politically and emotionally dependent. It is impossible to see how Mr Blair could retain Mr Campbell, or do without him. Yet for once, the Government may be suffering more damage than it strictly deserves.

William Hague used to say that the most exasperating aspect of dealing with Tony Blair at Prime Minister's questions was the shameless way in which the PM would lie. If he found himself in trouble, he was quite prepared to invent or distort facts; and examples would usually be small, semi-technical points, impossible to pin down at the time and hard to refer back to later. As the years went on, Mr Hague became convinced that he was dealing with a Prime Minister who had no respect for the truth.

Hence the irony; the greatest crisis of Mr Blair's premiership now threatens to overwhelm him, even though he and Mr Campbell were more or less telling the truth about the events which led up to Dr Kelly's death. Not that their behaviour was blameless; on the contrary, it exemplified the most disagreeable aspects of the Blair regime - its determination to bully the media into reporting the Government's activities on the Government's terms. This ruthless approach only intensifies when Alastair Campbell is dealing with those whom he would like to regard as trusties, and that includes the BBC.

It is amusing to recall that only a couple of years ago, the Blairites were congratulating themselves on the skilful way in which they had fixed the BBC. The chairman, Gavyn Davies, and the director general, Greg Dyke, were Labour supporters and friends of Mr Blair. This was a blatant example of promotion by cronyism, yet the PM got away with it.

It has now become clear that Downing Street had underestimated both men, which explains the envenomed nature of the Government's recent exchanges with the corporation. Mr Blair likes his cronies to keep cronying. If anything, however, Messrs Davies and Dyke have been too ready to defend their journalists. It seems far more likely that the BBC sexed up Dr Kelly's comments than that Alastair Campbell sexed up a report by the Joint Intelligent Committee. But this Government is not going to be able to get away with portraying itself as an upholder of truth and journalistic standards, especially when it is now in an argument with a dead man.

That is not a dispute which Mr Blair can possibly win, even though he has a respectable case in moral terms. Dr Kelly emerges from his friends' testimony as a fine and delightful man; clever, patriotic, dutiful, humorous; a serious scholar, a distinguished public servant, a devoted husband and father. That said, it is hard to escape the conclusion that when he decided to take his own life, his judgement had temporarily deserted him.

As a result of the Dianification of British public life, romanticism and spontaneity have swept aside reticence and stoicism. It has become almost impossible to question the validity of dramatic emotional gestures. But on the facts as far as established, Dr Kelly did not have sufficient reason to kill himself and Tony Blair does not have this good man's blood on his hands.

Not that this argument is likely to prevail. Tony Blair has already been judged by the high court of public opinion and found guilty, a verdict of which there is no appeal. All the perfumes of Araby will not remove the taint. But a man who has lived by spin and falsehood cannot complain when he becomes a victim of spin and exaggeration.

Even if Mr Blair manages to remain in office, he has suffered an irretrievable loss of moral authority, with enduring consequences for his Government's. For instance, it was never going to be easy for Mr Blair to take Britain into Giscard's Euro-constitution without a referendum. That difficulty has now become impossible.

Because he had little regard for most of his cabinet ministers while distrusting many of his backbenchers, Mr Blair always insisted on focusing the entire process of government on himself, and on his reputation for integrity. As that reputation has now been destroyed, it is hard to see how the Government can continue to function properly. It may drag on in office, but it will not really be in power.