Examining the consequences for Tony Blair following the gay adoption row

Tony Blair's decision to appoint Ruth Kelly as communities and local government secretary last May, a post which held key responsibilities for race, faith and equality, was last week privately described by one government minister as "either a colossal error of judgement or an arrogant gesture of misplaced authority". The public split in the Cabinet, over exemptions for Roman Catholic adoption agencies from new gay rights laws due to come into force in April, suggests that whatever the reason, the prime minister's ambition to leave No 10 on a high note has almost been wiped out by the row.

The Equality Act was, until last week, barelyonDowningStreet'sradarfor issues likely to disrupt Blair's valedictory tour. But for some openly gay Labour MPs the seeds of the crisis, which has exposed Blair's diminished and diminishing authority, were sown with the demotion of Kelly, a devout Catholic and member of the ultra-conservative Opus Dei prelature, from education secretary to the new communities department, One MP described the appointment as "almost insulting" and said the prime minister had appeared overly concerned with "social mobility and economic inclusion and neighbourhood renewal" rather than the issue of equality. He said: "Kelly's religious loyalty, and likely conscience over policy, we knew about. But when progress in the equality law was held up by Kelly last October we knew trouble lay ahead. She used the issue of thousands of responses in the consultation process to delay the implementation of the law. Alarm bells should have been ringing in Downing Street at this point. But as there were alarm bells ringing all over the place anyway, they were probably ignored." No longer.

Kelly's Catholicism has never been seen as a problem by Tony Blair. If there were doubts inside the Cabinet about Kelly's ability to oversee equality policy while holding a religious view which identifies homosexuality as a sin, no-one spoke out against her. Blair's Cabinets have never been seen as centres of outspokenness. Instead, his authority, over everything from Iraq to NHS reform, has largely remained unchallenged.

However, the Blair of 2006 and 2007 is damaged, his patronage now eroded and under fire, and he is facing continued investigation by Scotland Yard over the cash-for-honours scandal. He also remains tied to continuing failure in Iraq and the parallel demise in authority of the Bush presidency.

Frank Dobson, the former health secretary, believes the Cabinet split over adoption and equality rights reflects wider issues. "One of the biggest problems John Major's government faced in the end was that it looked as though it was not really in charge of things, and there is an air arising in the government at the moment that people are not quite in charge of their departments."

The Catholic adoption issue exposed both Blair's lack of authority and the continuing political ambitions of some in the Cabinet around him. One MP commented: "It could have been any issue, it just happened to be this one."

Since last year, senior figures in the Roman Catholic church have remained privately confident that an opt-out or an exemption from new equality laws would be granted to their adoption agencies. The laws, which will apply to England, Wales and Scotland when they are enacted in three months' time, outlaw discrimination in the provision of goods, facilities and services on the basis of sexual orientation.

Some Labour MPs appreciated what lay ahead when thedelaysbeganandthe suggestion of opt-outs arose. Chris Bryant, a gay Labour MP, said: "Where organisations are working on behalf of the state, the only thing that should matter is the interests of the children involved. It would be an enormous mistake to provide exemptions for faith-based organisations."

Nevertheless, Kelly's faith and Blair's Catholic sympathies encouraged some church leaders to believe theirs was a special case. Blair's wife, Cherie, is a committed Catholic. With her husband, she was given a private audience with pope John Paul II. The prime minister met pope Benedict XVI at the Vatican last June. A conversion to the Roman Catholic faith is expected once he leaves office.

Whitehall sources point to advisers in Kelly's department letting it be known that she had the early backing of the prime minister to investigate potential exemptions. Blair is said to have told a Cabinet gathering this month of the "possibility" of exemptions as a way of heading off closures of Catholic adoption agencieswhocouldnotlegallybe registered if they refused to accept the new guidelines. One ministerial adviser said: "This wasn't one of Tony's back-me-because-I'm-right issues. It was presented as a pragmatic solution to challenges that came from church leaders concerned about how their adoption agencies could continue to offer a service."

But the initially private concernsof cardinal Cormac Murphy-O'Connor, later backed by the archbishops of Canterbury and York from the Church of England, would be described as an issue of public "blackmail" which the PM wasapparently willing to condone. But with his authority gone, a row that had been simmering since September became the catalyst for a full-scale Cabinet split.

Ruth Kelly, pensions secretary John Hutton, and Labour's chairman Hazel Blears chose to back Blair's call for the pragmatic "exemptions" solutions. But many others - education secretary Alan Johnson, health secretary Pat Hewitt, Commons leader Jack Straw, Northern IrelandsecretaryPeterHain,culture secretaryTessaJowell,international developmentsecretaryHilaryBenn, environment secretary David Miliband, and Scotland and transport secretary DouglasAlexander-demandedthe legislation should not be watered down.

Even the PM's closest ally, the lord chancellor Charles Falconer, said it was "difficult to see how an exemption could be justified". Falconer's words could also be translated as: "It is difficult to see how Tony can get this through."

InanothereraBlairwouldhave steam-rolleredopposition.Notnow.The PM's official spokesman denied there was a problem. Hints then followed that a "transitional period" might be sought to allow the Catholic agencies time to adapt. But the scale and force of the Cabinet dissenters points to a minimal period of transition being allowed, if any, when the issue is debated in the Commons, possibly as early as next week.

Despite an appeal to "find a way through", Blair no longer holds enough authority to lead his Cabinet from the front. In spite of his spokesman saying there were "sensitivities" on both sides of the argument, the reality according to one former government adviser, was that "Blair caved in, simple as that".

He added: "The old Tony didn't have to suppress dissent as there was none. Tony today is yesterday's man and in politics that means you can speak, you can give orders but it doesn't mean anyone's listening."