The legislation is likely to include a tougher line against radical Muslim clerics in Britain who have been accused of whipping up hatred of the West among young Muslims. Mr Blair said: "I do think we need to look very carefully at those who are inciting such hatred in our community. That's one of the things we should look at over the next few months."
In a statement on the attack to a sombre Commons yesterday, the Prime Minister said the Government intended to stick to its original timetable to publish a draft Counter Terrorism Bill for consultation this autumn, to be pushed through Parliament next year. It is expected to create new offences of carrying out acts preparatory to terrorism and "glorifying or condoning" acts of terror.
He said: "If, as the fuller picture about these incidents emerges and the investigation proceeds, it becomes clear that there are powers which the police and intelligence agencies need immediately to combat terrorism, it is plainly sensible to reserve the right to return to Parliament with an accelerated timetable." His own view was that the normal process of the law "will not be enough".
He sought to build on all-party condemnation of the atrocities by promising to work hard to achieve consensus on the new laws and avoid the controversy seen when control orders were pushed through before the election in May.
The Chancellor Gordon Brown told the Transport and General Workers' Union conference in Blackpool: "I promise we will do whatever it takes and spend whatever is necessary to protect the people of this country to ensure that terrorism is defeated."
"We will send a message to terrorists that while lives have ended, the cause for justice never dies," Mr Brown said. "While buses and buildings can be destroyed, our values are indestructible. While hearts are broken, hope is unbreakable. Every generation is tested with the problems and dilemmas of the time and each era calls on great men and women to come forward and it is they who determine the character of an age."
Mr Blair told MPs it was "probable" that last Thursday's attack was carried out by "Islamist extremist terrorists" but praised the "overwhelming majority" of Muslims who stood behind every community in Britain. He said the Government would work with them "to make the moderate and true voice of Islam heard as it should be".
He disclosed that 74 families now had police family liaison officers but government officials said that number should not be seen as the likely eventual death toll, currently put at 52.
He said a memorial service for the victims would be held after consultation with the families and would be attended by the Queen.
Mr Blair won unusually warm praise from all sides for his response to the bombings. Michael Howard, the Tory leader, called it "calm, resolute and statesmanlike" and soft-pedalled the Opposition's original demand for an early inquiry into the lack of intelligence about the attack. This followed criticism of the call at yesterday's meeting of his shadow cabinet.
Mr Howard said: "Now is not the time for a discussion on detail. What I do hope is that in the weeks ahead we can all gain from a sober assessment of the systems we have put in place to deal with the terrorist threat."
There was no sign of a backlash by MPs who opposed the Iraq war. The Prime Minister argued that the terrorist attack had nothing to do with the conflict, listing similar atrocities in 12 other countries. He said: "It is a form of terrorism aimed at our way of life, not at any particular government or any particular policy. If you retreated on one front they would simply make you retreat on another. Therefore the only way to deal with it is to stand up to it and defeat it."
The Prime Minister praised the "steely determination" of Londoners who returned to work yesterday, saying they were showing the same spirit the city showed in the Second World War. "Britain may be different today but the coming together is the same."