Tony Blair was today facing a renewed threat to his premiership after the Butler inquiry concluded intelligence used to justify the war on Iraq was "seriously flawed".

The Prime Minister instantly mounted a defence of his decision to take Britain into the war, insisting he had acted in good faith.

He denied the invasion had been a mistake.

But the critical decision to form a coalition with the United States without United Nations support has led to calls for his resignation.

Conservative leader Michael Howard warned the premier's credibility had been damaged and the public would not trust him again.

Political historian Anthony Seldon, the headteacher of Brighton College whose biography of Blair was published last month, told The Argus: "Although he has been exonerated, he has lost considerable moral standing.

"I do not see how he can long remain at No 10.

"Tony Blair has done many good deeds for his country but the time is now approaching for him to depart."

The inquiry, set up to investigate the use of intelligence in the run-up to the conflict, was pointedly not an exercise in apportioning blame.

The 200-page report absolved the Government and intelligence agencies of "deliberate distortion" but its key findings remain damning:

Ministers failed to challenge claims by the intelligence agencies that Saddam Hussein had weapons of mass destruction
MI6, the Secret Intelligence Service, used untested agents in Iraq because of intense demands for information
Major decisions were taken by a small circle of key ministers and advisers around Mr Blair without consulting the Cabinet
Mr Blair reinforced the impression military intelligence was firmer than it actually was through his statements in the House of Commons
The claim Saddam could deploy weapons within 45 minutes should not have been included without qualification.

The brunt of the blame for the intelligence failures was laid firmly at the door of MI6 and the Joint Intelligence Committee (JIC), the senior body which draws up advice for ministers.

A relieved Mr Blair told the Commons: "No one lied. No one made up the intelligence.

"For any mistakes made, as the report finds, in good faith, I of course take full responsibility but I cannot honestly say I believe getting rid of Saddam was a mistake at all.

"Iraq, the region, the wider world is a better and safer place without Saddam."

Mr Howard accused the Prime Minister of turning the qualified judgements of the intelligence agencies into unqualified certainties in an effort to make the case for war.

He asked: "I hope we will not face in this country another war in the foreseeable future but if we did and you identified the threat, would the country believe you?"

Liberal Democrat leader Charles Kennedy complained the narrow remit of the inquiry meant it had been unable to investigate the key issue of the way politicians used intelligence to take the country to war.

The inquiry, headed by former Cabinet secretary Lord Butler of Brockwell, expressed surprise ministers did not order the agencies to reassess intelligence when UN inspectors failed to find Saddam's banned weapons in early 2003. It was also critical of the Government's controversial Iraqi weapons dossier, saying it was at the "outer limits" of the available intelligence.

The inquiry's strongest criticisms were reserved for the process of intelligence-gathering and analysis.

It acknowledged its strictures were so severe they would lead for calls for John Scarlett, the JIC chairman who is about to take over as head of MI6, to step down, although it said they should be resisted.

It did, however, implicitly acknowledge suggestions that he had been too close to No 10, saying future JIC chairmen should be "demonstrably beyond influence" and have "experience of dealing with ministers in a very serious role".