Our arrogant Prime Minister is running out of excuses

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A tempting inference could be drawn from recent events: Tony Blair and his advisers may be losing their touch. By no means deficient in intellect, they have been supremely good at manipulation, and their cunning has never been inhibited by addiction to the truth. In the past, however, they have known when to lie: what they could get away with. But their judgement now seems to have deserted them.

In his handling of the Mittal affair, Mr Blair has made two elementary mistakes. He forgot that the cover-up can be more damaging than the original offence. He also forgot that politicians should avoid situations in which their conduct can only have two explanations: that they are fools, or knaves. Yet this is where Mr Blair now finds himself.

When the Mittal story broke, Mr Blair and Alastair Campbell were instantly aware of its potential for embarrassment. Yet they have often spun their way out of worse messes, and this time they had luck on their side. The story would be competing for coverage with Princess Margaret's funeral.

Not only that; they had a plausible defence. "Romania is trying to modernise its economy," Mr Blair could have claimed, "so it is desirable to bring in foreign expertise and capital to privatise and modernise an out-dated steel industry. Britain may not have had a direct interest, but it is clearly to Britain's advantage that everything should be done to bring stability and economic progress to Eastern Europe.

Mr Blair might have gone on: "As for Mr Mittal, he may not be a British subject, but he is a friend of this country. He is also a highly successful entrepreneur. If the Government helps him to help the Rumanians, he might decide to invest more in the UK. The Tories seem to be saying that we should not do business with Mr Mittal. Is this because they are racist, or because they hate successful businessmen? They have questioned Mr Mittal's donations to the Labour Party, but he did so because he believes in a British Government that believes in business. To suggest that he was trying to buy favours is beneath contempt."

This would not have been a perfect defence. The juxtaposition between electoral assistance and ambassadorial assistance would still have left a smell of drains, intensified by Peter Mandelson's success in bringing the Hindujas back to the political agenda. (He will receive no gratitude for that from No 10). But the Blair Government could have provided itself with a plausible story, which would also have made it easier to explain the European Bank for Reconstruction and Development's decision to subsidise Mr Mittal.

The Government could then have argued that the EBRD shared its assessment. Now, however, the news that the British Ambassador's helpful letter, was reinforced by a £6m douceur, will appear like the next installment in a tale of corruption. During his rise to great wealth, Mr Mittal must have brought off many financial coups. But did he ever manage to achieve such a rapid 48-fold increase in the value of an investment as when he gave £125,000 to the Labour Party, and received £6m from the British taxpayer?

The fault does not lie with Mr Mittal. He is just a hopeful, hustling billionaire. It lies with Mr Blair's claims that his Mittal steel was a British company. Unless the PM was a fool, he must have known that this claim was unsustainable. Mr Blair is not a fool; that defence is not open to him. When he insisted that Mittal is a British company, he must have known that he was lying.

So what led him not only to lie, but to lie in such a feeble and self-destructive fashion? A simple explanation would be a combination of arrogance and naïveté. Power has gone to Mr Blair's head. A combination of apparently unlimited electoral puissance and an underlying lack of both intellectual self-confidence and political principle has destabilised him. Mr Blair has never been much good at explaining his beliefs; he no long sees why he should even have to try. Recently, as was demonstrated over the "wreckers" speech on public services, his response to the rough probing and disrespect which are inescapable in democratic politics was a loss of temper. He no longer accepts the requirement to submit himself to any questioning whatsoever. Yet once a premier ceases to respect his questioners, he also ceases to respect his voters.

The one set of persons to whom Mr Blair is, if anything, more respectful is the rich. Few prime ministers have ever taken office understanding so little of the British governmental process as Mr Blair did, or thinking less of it. He knew that a lot was wrong with the public sector, but he did not know how to put that right. But he had learnt an important lesson from the Thatcher years, when British business, so long depressed and disordered, had sprung ahead and recovered its status in world markets. From the outset, he was convinced that the answer to any problem he encountered in government was to bring in a businessman to solve it for him.

That is a simplistic view. Not all parts of the public service are susceptible to the business approach. Businessmen are there to make a profit, yet governments have to provide services to people from whom no profit could ever be expected. The ethos of business is commercial. To paraphrase Calvin Coolidge, the business of business is business. Yet the activities of government cannot all be reduced to commercial imperatives. There is an inescapable dimension of public service, and of politics.

But as Mr Blair demonstrated over his handling of the Rose Addis case, he does not believe that the public is entitled to complain about the services it receives. He is also impatient about politics. If he ever did, he no longer believes that the answer to political questions lies in the rough and tumble of debate. He believes that he is entitled to call in the disinterested expertise of businessmen, and that when he has done so, all debate should cease.

This will not work. Most voters understand business better than Mr Blair does. Above all, they understand that businessmen have business interests. The voters have no objections to this, as long as those businessmen do not try to promote their interests by exercising undue influence over government.

But it will be hard for Mr Blair to persuade the voters that his business friends do not have access to undue influence. Few public reputations now stand lower than Neil Hamilton's. Yet when Mr Hamilton became a minister, he wrote to Mohammed Fayed and told him that he could no longer involve himself with any aspect of Mr Fayed's affairs. As a result, Mr Fayed turned on him and destroyed him.

If Mr Hamilton had written letters on Mr Fayed's behalf similar to the one Tony Blair wrote on Mr Mittal's behalf, Mr Hamilton would not now be a bankrupt and would still be a Member of Parliament. The one inescapable conclusion is that as a government minister, Neil Hamilton was more honourable than Tony Blair is.