The ill-judged legislation that parliament rejected would have allowed the police to hold terror suspects for 90 days without charging them. It ammounted to the suspension of Habaeus Corpus- which has been the foundation stone of English liberty since the days of Bad King John.
It's the end. But Blair doesn't see it. He's holed in several places and leaking vital fluids and nobody loves him anymore. He's a goner. But will he step aside of his own free will? Of course not. They never do. Like every other dear leader from Churchill to John Major he will stay in office, flailing about impotently, in the hope of magical rescue, until someone is forced to step up, more in pity than in anger, and fire a silver bullet into his bonce.