Mr Blair is expected to promote more Blairites to the Cabinet after moving John Hutton from the Cabinet Office to take over the task of radical pensions reform and welfare cuts from Mr Blunkett as Work and Pensions Secretary.
Hazel Blears, a committed Blairite moderniser, was being tippedfor promotion to the Cabinet next week when Mr Blair finishes his reshuffle. She could replace Mr Hutton at the Cabinet Office as Chancellor of the Duchy of Lancaster.
Mr Blair has been threatening a pre-Christmas reshuffle to crack down on the warring factions in the Cabinet who have been in open revolt over school reforms, cuts in invalidity benefit, and a ban on smoking. There are more revolts threatened over the White Paper on health.
Michael Howard, the Conservative leader, taunted Mr Blair over his faltering ability to control his Cabinet since announcing he would step down before the next election. Senior supporters of Gordon Brown, the Chancellor, who is waiting to take over power, privately stepped up calls for Mr Blair to go before his preferred departure date in 2008.
Mr Howard told Mr Blair at Prime Minister's question time: "This has been an extraordinary week - we have seen the slow seepage of your authority turn into a haemorrhage."
He mocked Mr Blair, saying Mr Brown was now the main authority in the Cabinet. Quoting the former Tory chancellor Lord Lamont's attack on John Major, Mr Howard said: "For how long will the country have to put up with this lame-duck Prime Minister, in office but not in power?"
Mr Blair was flanked by John Prescott, the Deputy Prime Minister, and other senior cabinet colleagues who looked uncomfortable on the front bench as Mr Howard listed their opposition to reforms.
But Mr Blair made it clear there would be no let-up on the reforms that have sparked the rebellions within the Cabinet. He told Charles Kennedy, the Liberal Democrat leader, who urged him not to impose his will over the £13bn incapacity benefit, that it needed reform and insisted that "this side has got the courage to do it".
However, ministers were privately dismissing Mr Blair's confidence. One minister described the Work and Pensions post as the "job nobody wants'' and a "poisoned chalice".
Mr Hutton is regarded as an ultra-loyal Blairite who will deliver the radical changes to welfare and pensions that are being demanded by Downing Street. They could include forcing more on invalidity benefit to seek work, and encouraging more people to work beyond the age of 65. Mr Blair underlined his determination to reform welfare by appointing Gareth Davis, a Downing Street official who wrote a leaked memorandum demanding more radical reforms, to be head of policy at the Department of Work and Pensions. Promoting Ms Blears would be seen as a clear signal that Mr Blair is determined to stay until his legacy is in place.
Ms Blears is a keen advocate of "new localism", the Blairite drive to bring more people at local level into decision-making.