Tony Blair's hopes of a cross-party deal on an investigation into the intelligence that supported his case for war against Iraq were wrecked last night.

The Prime Minister was desperate to draw a line under the row over the secret service's reports on Saddam Hussein's weapons of mass destruction (WMD) with an all-party committee modelled on the Franks Inquiry into the Falklands War.

But Liberal Democrat leader Charles Kennedy refused to co-operate with the probe when No 10 insisted it would not be able to examine the political use of the intelligence used to lead the country into war.

Foreign Secretary Jack Straw was forced to tell the Commons that only one senior Labour and Tory MP would join the five-strong committee whose remit also encompasses the "intelligence coverage available" on all countries "of concern" with regard to WMD and the global trade in them.

Other members of the committee, chaired by ex-Cabinet Secretary Lord Robin Butler, are another former senior civil servant and an ex-chief of the defence staff.

Horse-trading between the Government and the Lib Dems continued to no avail until shortly before Mr Straw made his statement to MPs.

The Foreign Secretary said Labour's former chief whip Ann Taylor and Tory Michael Mates would join ex-civil servant Sir John Chilcot and former chief of the defence staff Field Marshal Lord Inge in presenting a report to be published before the Commons summer recess in July.

The review committee will meet in private and its report will be published, but sections dealing with top-secret mat-erial may be blanked-out.

Mr Straw said the committee would work closely with its US counterpart and the coalition's Iraq Survey Group (ISG) which is still combing the country for evidence of WMD.

The Tories agreed to take part in the probe, arguing that its remit to "make recommendations to the Prime Minister for the future on the gathering, evaluation and use of intelligence on WMD, in the light of the difficulties of operating in countries of concern" allowed the way ministers interpreted secret information to be probed.

But Mr Kennedy said: "I have frequently said that Lord Hutton's remit was too narrow. The remit for this inquiry is equally unacceptable.

"An inquiry which excludes politicians from scrutiny is unlikely to command public confidence."

Earlier, Mr Blair, appearing before the Commons Liaison Committee, explained why he thought an inquiry was now justified following comments from the former head of the ISG, David Kay, that stockpiles of WMD would not be found in Iraq.

He said: "I think it is right, as a result of what David Kay has said, and the ISG now probably won't report in the very near term its final report, that we have a look at the intelligence we received and whether it was correct or not.

"But I do simply say that whatever is discovered as a result of that inquiry, I do not accept that it was wrong to remove Saddam Hussein or the world is not a safer or better place for that."

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