Now even the Blairites talk about the PM's exit

Cabinet ministers are talking openly about when and how Blair will go, and what will happen afterwar

As they ponder his demise, the people around Tony Blair are engaged in a desperate search for anything to extricate him from the Iraq mess. Nothing is being ruled out: the grand gesture, the series of small gestures. At the heart of it is the need to portray him as different from the man under whose tutelage he went to war. Operation Bush Distance, as one of the Prime Minister's advisers calls it, might provide him with a last chance.

It is hard to overstate the impact the photographs of torture and abuse have had on Britain's governing party. Confidence about the Iraq invasion had long before eroded, but while the debate was focused on issues such as weapons of mass destruction or the legal advice, many in the government had convinced themselves that they could "move on" from Iraq. Now they accept they cannot.

For the first time, even Labour MPs, ministers and officials loyal to Blair are speculating that he might quit over the next few months. They talk grimly, but openly, about the timing: should it be after the forthcoming local and European elections, straight after the summer holidays or around the time of the party conference? They talk openly, but grimly, about the manner: will he go of his own accord or should a group of senior party figures seek to talk to him? They talk of his successor. Would anyone summon the courage to stand against Gordon Brown? They look at the polls and ask: would Brown fare better against Michael Howard?

There is still a sizeable number who would, in an ideal world, want Blair to stay, but they accept that the war has made the world less ideal than it might be. In order to survive the summer, Blair has to cope with three imminent crises - these are the ones he can foresee. Most of the damage from the American photographs and the accusations by the International Committee of the Red Cross and Amnesty of British mistreatment of detainees and civilians is beyond his control.

The PM is struggling to deal with the day-to-day, to fend off accusations that he and his ministers should have known about and dealt with the Red Cross complaints earlier. Jack Straw is furious that he was not told and is letting that be known.

There is worse to come. The first week of "campaigning" for the elections on 10 June has sent ministers into a deep gloom. Their predictions range from "difficult" to "terrible", with constituencies unable to muster canvassers, and canvassers unable to muster voters. A turnout of below the record low of 24 per cent for the 1999 European elections now looks possible, even with postal ballots in several areas. Ministers fear that gains for the Liberal Democrats will demonstrate the extent of popular disquiet over the war. Gains for the Conservatives will be seen as a precursor for the general election and will damage the argument that Blair remains a vote-winner in "Middle Britain".

Three weeks later, on 30 June, the fabled "handover" of power in Iraq will take place. In the Foreign Office, there is considerable concern that politicians, in their search for any "good news", will try to make too much of it. The security situation is likely to deteriorate further, while the amount of power actually being transferred is minimal. "Our problem," says one UK diplomat, "is that the television pictures will look exactly the same. They will still show American and British soldiers in confrontation with Iraqis."

Blair knows he has to be seen to be doing something. "We have no grip on what is happening and where it is all going," admits one cabinet minister. The departure of Sir Jeremy Greenstock as Britain's chief representative has left a hiatus before the arrival of Britain's first post-Saddam ambassador, Edward Chaplin. One option is to send someone out for a few weeks to try and influence the Americans on the ground, but, as Greenstock found out to his frustration, that is easier said than done.

If Blair cannot bring himself to acknowledge errors, he must, say some loyalists, bring himself to create more of a distance from Bush. One MP close to Blair says he has been urging Blair for months to emphasise "dividing lines" with the American president. "Our biggest danger both on the ground in Iraq and diplomatically is being linked with the US," says one serving cabinet minister. "We suffer from guilt by association." The debate is, according to one adviser, "very live". Some say the time for a grand gesture has passed and it would now be counter-productive. "It would make the continued presence of British troops harder to justify," says one minister, "and it would hasten Tony's decline. If he admits his single biggest gamble went wrong, what credibility would he have left?" This caucus is relying on a shift in the Bush administration itself - to show greater humility, to embrace the United Nations not through gritted teeth. Blair will get some kind of UN Security Council resolution endorsing the handover, but so low is his stock internationally and so reluctant are other leaders to help him that the resolution will be weak. While there is a yearning at the heart of Downing Street for Bush to sack Donald Rumsfeld and to ditch Dick Cheney as his running partner for the presidential elections, they acknowledge that this is wishful thinking.

Labour MPs are in a state of fear and anticipation but also some paralysis. They are waging bets on Blair's resignation, but have convinced themselves they cannot influence it. The parliamentary party does not have an equivalent to the Tories' 1922 Committee, the fabled "men in grey suits" who did for Margaret Thatcher. There is talk of urging family friends to talk to Blair. There is talk of a small group of veterans in the Commons, the likes of Jack Cunningham, Gerald Kaufman and Clive Soley, going to see him. There is talk of senior cabinet members doing the business, but not Brown himself. "If it happens, we would have to go to him directly. We would have to be seen as straight on this," says one senior MP, anything but a Brownite. "We cannot and must not use Gordon as a battering ram. That would have the reverse effect and in any case it would be cowardly." Such a group is not yet being formed. But such scenarios are being considered.

All the conversations I have had in the past few days have been with people either intensely loyal to Blair or in the mainstream of the party who have no particular allegiance to Brown. Some MPs sympathetic to the Chancellor are also speculating on his prospects over the next few months. They discuss arithmetic, the recent Mail on Sunday poll suggesting that he would garner more votes than Blair in a general election (by their calculation, some 40 Labour MPs thus depend for their survival in the Commons on Brown), but Brown's inner circle is extremely wary of engaging in this debate. They are calm because they know the change will happen. They are nervous too because they know the problems they will inherit.

Downing Street officials are preparing themselves for a new batch of photos, for videos detailing even more hideous abuse. They are preparing themselves for more acts of individual retribution to follow the decapitation of the American Nick Berg, possibly against a Briton either in Iraq or elsewhere in the Middle East. And they are preparing themselves, as they have been for some time, for a terrorist "spectacular" in the UK. They know they have yet to face the biggest charge of all - that their acts have put Britons in greater peril in their homeland.

For all his dogged insistence that he was right, Blair has shifted on one crucial point. According to his friends, he accepts that his "vindication" on Iraq might take another five years or so - in other words, not during his term of office. Some around him wonder whether that might suggest he is laying the ground for a summer or autumn departure.

Still, they cling to their optimistic prediction, and this is it: the 10 June election results will be bad, but muddy and inconclusive. In any case, all governments go through mid-term setbacks. Next month's European summit agrees on a new constitution. Blair plays a constructive role in those negotiations while holding on to Britain's "red lines". A UN resolution on Iraq is secured for which Blair claims some of the credit. The handover proceeds comparatively smoothly and the prisoner abuse scandal goes away. The Comprehensive Spending Review in July refocuses attention on the domestic agenda, on the consistently strong economy and on improving public services. Then everyone goes off on holiday, Blair makes a triumphant speech to the party conference in late September and the hysteria of the media and the Westminster world is highlighted for all to see.

I put this scenario to one veteran Labour MP who wishes Blair to stay. It was, he said, "possible". I then reminded him that in late March when I broached the idea of Blair's resignation he dismissed it as "fanciful". Now he assesses the prospect of Blair going any time between July and October as "not a million miles away from 50:50".