Faith & Reason: Ruth Kelly, her hard-line church and a devout PM wrestling with his conscience

Catholic-run adoption agencies should retain the right to ban gay couples, say Tony Blair and Ruth Kelly. Most other cabinet members are horrified at the thought - and the scene is set for a political holy war. Francis Elliott reports

She is a devout Catholic and member of the Opus Dei sect. His leanings to Rome have been rewarded with audiences in front of successive Popes.

So, when Tony Blair and Ruth Kelly team up to deny gay couples equal access to church-run adoption agencies, as we reveal today, it is little wonder that their opponents believe it is the "Catholic tendency" at work.

"We are descending into a spiral of immorality," said Cardinal Keith O'Brien, leader of the Catholic church in Scotland, when that country brought its laws into line with those of the rest of the UK to allow local authorities to place children with gay parents, just before Christmas.

Now, a further change in the law to remove from Catholic-run adoption agencies the right to ban gay people threatens to provoke a full-scale battle throughout the UK.

Archbishop Vincent Nichols, who is set to become the leader of England's Catholics, recently warned the Government not to "impose on us conditions which contradict our moral values".

"It is simply unacceptable to suggest that the resources of... adoption agencies ... can work in co-operation with public authorities only if the faith communities accept not just the legal framework but also the moral standards being touted by the Government," he sermonised last November.

When it comes to Mr Blair, the archbishop is preaching to the converted, according to senior ministers. The Prime Minister first asked Alan Johnson, then responsible, to include a loophole in anti-discrimination legislation to allow the Catholic ban on gay parents early last year.

When he refused, the PM moved him and handed the equalities brief to Ms Kelly, whom he knew could be trusted to back him on the issue. But a cabinet row last October delayed the introduction of the Equality Act until this April.

Ms Kelly now has to produce the regulations that spell out exactly how the new law will work, and the pressure is building towards an explosive political battle.

Mr Johnson remains implacably opposed to any exemption and is being supported by Peter Hain, Jack Straw, David Miliband, Des Browne and even Mr Blair's close friend Lord Falconer.

For his part, the Prime Minister can count only on Ms Kelly and John Hutton if the issue is pressed to the point of a full meeting of the cabinet committee that settles disputes on domestic policy. Members of the Domestic Affairs Committee, chaired by John Prescott, have been expecting a letter from Ms Kelly on the new regulations for weeks. Her aides say she will send them her proposals this week after further "detailed policy discussions with colleagues".

But Mr Blair can't count on much support among backbenchers. Angela Eagle, who topped a recent election to become the vice-chairman of the Parliamentary Labour Party, and Chris Bryant, MP for Rhondda, have been leading behind-the-scenes efforts to defeat the "Catholic tendency".

In a meeting last week Ms Kelly insisted that her wish to allow church-run adoption agencies to discriminate against gay couples had nothing to do with her own religious sensibilities.

Instead, the Communities Secretary said, she was acting in the best interests of vulnerable children since the Catholic bishops were threatening to close the seven agencies run by the church rather than comply.

The bishops point across the Atlantic at the example provided by the closure of an adoption agency by the Catholic church in Boston after the passing of anti-discrimination laws. It could no longer reconcile its operation with the Vatican ruling that gay adoption was "gravely immoral", it said.

In Britain the seven Catholic agencies account for around 4 per cent of the 2,900 children placed for adoption last year. But the agencies handle around 33 per cent of the so-called "difficult-to-place" children, some of whom have to wait years before they are found a home.

Since gay and lesbian people have proved to be more likely to adopt such children, there is anecdotal evidence that some Catholic agencies have been quietly ignoring the Vatican in a small number of cases.

Campaigners such as Ms Eagle and Mr Bryant say it is a nonsense to suggest that the best interests of such vulnerable children are best served by the exclusion of the very people most likely to provide them with a loving home.

Downing Street, anticipating the trouble the issue is likely to cause, tried to broker a compromise. Conor Ryan, Mr Blair's education adviser, suggested Catholic agencies could refuse to accept gay couples but would have a "duty to refer" such applicants to agencies that would accept them.

Ms Eagle draws a comparison with a famous incident in Alabama in 1955 that sparked the US civil rights movement to explain why she believes such a fudge would be offensive as well as unworkable. "It is the equivalent of telling Rosa Parks to wait for the fully integrated bus coming behind."

So just why is Mr Blair so desperate to maintain the ban, and can he and Ms Kelly win out in the face of the opposition? Despite the fact that his wife is a Catholic, close observers say it is unlikely that she has been a significant influence on this issue.

Cherie Blair is on the liberal wing of the Catholic church in England. She has, for instance, publicly said that she believes that the Vatican's teaching on birth control is wrong. Mrs Blair is also in favour of the ordination of women priests.

It may be that the PM is simply nervous of the Government being blamed for the closure of seven charitable agencies and is nervous of the political fall-out.

Certainly Gordon Brown is fully aware of the potentially negative electoral impression of the issue, especially in Scotland, which goes to the polls this May to elect a new Scottish Parliament.

The repeal of the legislation forbidding the "promotion" of homosexuality in schools was deeply contentious north of the border, especially in Labour Catholic heartlands on the west coast. The Scottish Executive has written to Ms Kelly asking that she take a "balanced" view - in effect supporting her attempts to win an exemption.

It is a little-noted facet of Mr Brown's political history that he has failed to vote every time there is a significant Commons division on gay rights. True to form, the Chancellor is showing scant interest in the current battle, although his most senior lieutenant, Ed Balls, is said to be firmly against allowing an exemption.

But for Ms Kelly there is no hiding place. Already wounded by the revelation that she sent her dyslexic son to a private boarding school, the Communities Secretary knows that she will sustain further damage in the coming weeks.

She first faced calls to resign from her job as the minister with overall responsibility for equality last May when she refused to say whether she believed that homosexuality was a sin.

"I don't think it's right for politicians to start making moral judgements about people. It's the last thing I want to do," she said. Later she added: "Everyone is entitled to express their views in free votes on matters of conscience."

Her membership of the Opus Dei sect, which encourages its members to take "holiness" into their working lives, has excited most suspicion among her colleagues. The sect, located firmly on the traditional wing of the church, has an uncompromising attitude to practising gays, regarding them as "serious sinners".

Ruth Kelly's advisers say that she believes that gay and lesbian couples provide loving homes for adopted children but their words would carry more weight if she, herself, said plainly that she believed that same-sex adoption was acceptable.

The scene is now set for a political Battle Royal. Tony Blair, an outgoing Prime Minister, is determined to support the Catholic bishops against the gay lobby, despite the opposition of most of his Cabinet.

In one further twist, David Cameron is likely to vote against any exemption for the Catholic agencies if the issue is put to a Commons vote, a senior member of his team has told The Independent on Sunday. It would be quite a parting gift from Mr Blair to the Opposition should he hand them the gay rights mantle.

In favour of an exemption

The coalition of leading Catholics opposed to gay adoption

Ann Widdecombe

The ex-minister, an implacable opponent of same-sex adoption, said that two men who had adopted three children made "a mockery of the law" two years after same-sex adoption was made legal.

Pope Benedict XVI

As Cardinal Joseph Ratzinger, and head of the "Congregation for the Doctrine of the Faith", he signed a statement in 2003 that said allowing cohabiting gays to adopt was "gravely immoral".

Vincent Nichols

The Archbishop of Birmingham fired a warning shot over the Government's bows last November when he warned in a sermon of a "serious backlash" if the new gay rights laws were introduced.

David Alton

The former Liberal MP, and a vocal campaigner against abortion, now sits in the House of Lords as an independent peer, where he remains a staunch supporter of traditional Catholicism.

Equality before the law

The Act that has fuelled the clash between Catholics and gay lobby.

Same-sex couples have been allowed to adopt children in England and Wales since 2002; Scotland followed suit last year, but Northern Ireland remains opposed. Last year, the Government passed anti-discrimination legislation that comes into effect in April.

The law, supposed to guarantee gays equal access to goods and services, already faces a challenge in the High Court from religious groups this March. Now Catholic bishops want an exemption to allow church-run adoption agencies to ban gay couples applying. If it's not granted they say seven agencies will close, citing a Boston adoption agency that shutrather than flout the Vatican ruling that gay adoption is "gravely immoral".

Last year, Catholic agencies placed 4 per cent of the 2,900 children adopted and 33 per cent in the "difficult to place" category. Gay and lesbian couples such as Tony and Barry, are more likely to adopt such children, and campaigners say it is wrong to deny them a loving home. There are no reliable statisticson how many children are placed with gay parents each year.