The loss of the Conservative seat would reduce Mr Major's majority in the Commons to one. This would make it more difficult for the Prime Minister to stay in office until a general election in May next year at the end of the Government's full five-year term, Mr Blair told a by-election meeting in Tamworth.
Previous by-election losses have been wiped out by the Tories at subsequent general elections. But both sides see the Staffordshire South East result as a key indicator.
Mr Blair said: "A Labour win will show their are no no-go areas for New Labour. The Tories know this. They are terrified of losing this seat. If we win here, they will not be able to dismiss defeat as mid-term blues or a protest vote.
"They know that if we win here, it will be the clearest sign yet that we are back as the party of the mainstream majority; that people are not just voting against the Government, but voting for an opposition that is credible, realistic and can give this country the fresh start it is crying out for."
One clear message emerging for Mr Major is that he should carry out a summer reshuffle of his Cabinet team, albeit reluctantly. Conservative "focus" group polling in Tamworth has shown that voters regard the Government as "tired".
Two ministers, David Curry and David Maclean, are tipped for promotion to the Cabinet and there has been speculation that the party chairman, Brian Mawhinney, who has seen the polling results, wants Mr Major to drop Virginia Bottomley, the National Heritage Secretary, who was campaigning in Tamworth yesterday.
The Tories believe the by-election result could mark a turning point in their fortunes. Privately, they are already admitting defeat, in spite of the upbeat remarks last week in the seat by Kenneth Clarke, the Chancellor. He predicted that Jimmy James, the Tory candidate, would be the first recipient of the "feelgood factor".
But private polling has given the Tories hope that the disenchanted voters can be won back. "The venom has gone. There has been a real change of mood," said one senior party campaign source.
The Deputy Prime Minister, Michael Heseltine - the fifteenth cabinet minister to campaign for the seat - last night appealed directly to wavering Tory voters to return to the fold.
The Tories also claim their polling, from a sample of voters in Tamworth, showed deep scepticism and the threat of a backlash against Mr Blair. "They say that he won't last very long after the election, that the Left will stick the knife in his back if they get in office," said the campaign source.
But the Tory sample polling also shows that Mr Major is highly vulnerable to the charge of betrayal by former voters for tax increases since 1992.
Mr Blair last night scoffed at a Tory briefing which claimed that a defeat by 5,000 votes would be a good result in a seat where they are defending a majority of 7,192 after the death of Sir David Lightbown.
In an interview with the Press Association yesterday Mr Blair branded Mr Major's party as "more right wing" than the Tories under Margaret Thatcher. He also rejected suggestions that his handling of the Harriet Harman affair had cost votes, saying he had been right not to sack his Health spokeswoman over her choice of a selective grammar school for her son.Reuse content