Blair 'to quit in two years'

Tony Blair's close allies have offered a dramatic olive branch to Gordon Brown by suggesting the Prime Minister will retire in two years.

They say Mr Blair will probably quit a year after the general election - long enough to see the two biggest government headaches, Iraq and the European constitution, laid to rest.

The fresh line emerged from senior Labour figures in an apparent bid to quell rising speculation over Mr Blair's future damaging the campaign for the 10 June elections.

Earlier this month, senior ministers including John Reid and Charles Falconer insisted Mr Blair would stay on for a full third term in office, meaning at least five more years. This antagonised backbench supporters of Mr Brown who were hoping for a smooth handover during the next parliament. One senior supporter and friend of Mr Blair said: "Of course he will fight the election and, of course, he will see through the Iraq situation. He also wants to see progress in the Middle East and feels bound to lead the campaign in the European constitution referendum. But after these goals are completed he will probably be ready to move on."

There is no suggestion of any formal deal between Mr Blair and Mr Brown, something-that Downing Street has always denied. If the Prime Minister stands down in 2006, Mr Brown - or another successor - would have three years to prepare to fight for an historic fourth term.

A handover in two years has the attraction of avoiding a leadership battle before the next election, expected next spring, which could damage Labour's prospects for a big majority. Mr Brown, seen as the overwhelming favourite to succeed the PM, is said to regard a healthy majority as essential for Labour to carry on with radical reforms.

But there were continuing reports that some of Mr Blair's supporters fear a worsening crisis in Iraq could force him out this year.

The Prime Minister used a press conference in Turkey to issue a defiant message to his critics, saying repeatedly he would not "cut and run". In words which aides said applied to his leadership and British involvement in Iraq, he said: "The task of leadership when things are difficult is precisely not to cut and run, but to face the difficulties and to overcome them."

Mr Brown also sought to quell the rumours by issuing a warm endorsement of the premier. An aide said: "The Chancellor and the Prime Minister are in daily contact and they are both clear that we are not going to be diverted by malicious, divisive and baseless gossip."

Downing Street was aghast at a weekend of heated speculation that ministers were jockeying for position in anticipation of a leadership change. The flurry was sparked by Deputy Prime Minister John Prescott suggesting ministers were staking out their positions and claims - which appeared to be groundless - that he and Mr Brown met in a car park in Scotland to discuss a "peaceful transfer" of power to the Chancellor.