Blair turns up the heat on the Taliban

Afghan regime admits it is protecting bin Laden; Proof of involvement is 'incontrovertible', says PM; Campaign will be funded from public borrowing

War in Afghanistan moved a step closer yesterday after the Taliban said Osama bin Laden was under their jurisdiction but gave no indication that they would hand him over.

Meanwhile, Tony Blair said he had seen "incontrovertible" evidence that Mr bin Laden was behind the 11 September attacks while the US warned of further terror strikes in retaliation for a US attack.

Amid a growing belief that armed strikes against Mr bin Laden are imminent, the Government gave its strongest hint yet that it wanted to see the Taliban regime toppled, as well as the prime suspect arrested. The Foreign Office minister Peter Hain said the Taliban and Mr bin Laden's al-Qa'ida group were "almost inseparable" and suggested that military action would encourage Afghans to stage a "popular uprising" to take over the country.

The Prime Minister said he had seen evidence convincing him of Mr bin Laden's involvement and that the military response would be "proportionate, targeted, effective".

He said the US and Britain were "engaged in an act of justice" rather than revenge. "I have seen absolutely powerful, incontrovertible evidence of his link to the events of 11 September," Mr Blair told BBC1's Breakfast With Frost.

"We can certainly eradicate the bin Laden network and we should do that," he said. Mr Blair again issued a warning to the Taliban that they must give up Mr bin Laden ­ a "guest" in their country ­ or face the possible overthrow of their regime.

"If they remain in the way of achieving our objective ­ namely that bin Laden and his associates are yielded up and the terror camps are closed ­ then the Taliban themselves become our enemy," said Mr Blair.

But the Prime Minister's warning ­ if indeed, it was heard by the Taliban ­ had little impact. The Taliban leader, Mullah Mohammed Omar, told his people they had nothing to fear from an attack from the West because Americans were "cowards". He told the state-controlled radio: "Americans don't have the courage to come here." And he reminded the US of the fate of the Soviet army during its ill-fated occupation. "If you attack us, there will be no difference between you and the Russians. We are peace loving and we hate terrorism. The murder of one person is the same as the murder of all humanity," he said.

"Whatever the Americans are facing is the result of their policies and the US authorities should review their policies and should not unnecessarily create problems for Muslims."

In a further move ­ perhaps calculated to provoke an American attack ­ a senior Taliban spokesman said Mr bin Laden was still in Afghanistan, that the Taliban knew where he was and that he was under their control. Abdul Salam Zaeef, the Taliban's ambassador to Pakistan, said: "He is in our control ... Osama is in Afghanistan, but he is at an unknown place for his safety and security. Only security people know his whereabouts. We are thinking of negotiation. [If direct evidence of bin Laden's role were produced] it might change things."

The US considers this nothing more than playing for time. The White House Chief of Staff, Andrew Card, repeated President Bush's warning that there was no room for negotiation. "We've told the Taliban what they should be doing," he said. "They've got to turn not only Osama bin Laden over but all of the operatives of the al-Qa'ida organisation. They've got to stop being a haven where terrorists can train."

The Attorney General, John Ashcroft, gave the most stark warning yet of the "substantial risk" of further terror strikes. "We believe there are substantial risks of terrorism still in America," he said, adding: "Frankly, as the US responds, that threat may escalate."

In Britain, the Government is ready to increase borrowing to fund the war while resisting cuts to public-service spending promised in the election. Mr Blair said the UK economy remained strong but admitted that he may have to loosen fiscal policy to cope.

"We have the ability which we didn't have a decade ago to loosen monetary policy, even fiscal policy if necessary, because we in Britain are already increasing our public spending on key services like health and education," he said.