Mr Tony Blair will make his most important speech as prime minister to his party conference tomorrow, knowing Labour may now face a genuine fight to win the next election.
As Labour delegates arrived for what is almost certainly the last party conference before the general election, two new polls put the Conservatives ahead, with a lead of between four and eight points.
The damaging Channel 4 poll - putting support for Labour at just 32 per cent, eight points behind the Conservatives on 40 per cent - came as Mr Blair and senior ministers made an eve-of-conference bid to dampen public anger about petrol prices, pensions and the Millennium Dome, and to kill off continuing Conservative suggestions of a cover-up over Formula One chief Bernie Ecclestone's £1 million donation to the party in 1997.
While denying that he had intended to "mislead" in comments about the Ecclestone affair, the Northern Ireland secretary, Mr Peter Mandelson, acknowledged the government had got it wrong over the fuel crisis and said it was time for it "to be altogether more open, straighter" with the public.
In the same spirit, the deputy prime minister, Mr John Prescott, admitted the government had yet to convince the elderly that they are getting a fair deal on pensions.
And Mr Blair put pensioners at the top of his list of priorities, as he signalled a listening government extremely anxious to counter charges that it ignores public opinion and is out of touch.
On the fuel revolt which has seen Labour's previously commanding lead collapse, Mr Blair said: "I think it's clearly obvious that people were angry and wondered how on earth this could have happened. It happened on my watch, so I take responsibility for it."
And on the Dome - which has so far cost £628 million of public money, and for which the government is desperately seeking a buyer - the prime minister admitted the intended millennium monument had not lived up to expectations.
However, following the development minister Ms Clare Short's acceptance that it had been "a flop", Mr Blair refused to apologise for the project.
"I don't apologise for trying to do something really ambitious for the millennium. It's not been the success we hoped, that's true, but I do say to people, try and put the other side of the balance sheet," Mr Blair told the BBC's Breakfast with Frost programme.
A large area of Greenwich had been reclaimed, 30,000 jobs created over the next five to seven years, and the Dome was still the most popular visitor attraction in Britain. "What I'm probably saying is that, probably, if I had known then what I know now about governments trying to run a visitor attraction, it was too ambitious," Mr Blair said.
On the two issues most immediately endangering his government, Mr Blair dismissed the 60-day "deadline" set by protesters for a cut in fuel prices, and again rejected calls to restore the link between earnings and pensions.
While stressing the government's commitment to raise the minimum income guarantee for Britain's poorest pensioners, Mr Blair insisted: "We can't do that, and this is for a reason I hope people will understand. If we link pensions to earnings now, it won't be a great problem for this government. But 10 to 20 years down the line, it would impose a huge burden on that generation."
Maintaining that the government did not have a huge windfall to fund a cut in petrol prices, Mr Blair said the measures being implemented now meant the fuel blockades would not be repeated. Asked about the threat of resumed action if no cut is made within 60 days, he said: "As I said at the time, I can't accept deadlines . . . Of course we will try and do what we can, but we are not in a position to take the decisions. We have got to look at the sums and the figures."
With the chancellor, Mr Brown, due to meet both issues head-on in his speech this afternoon, Mr Blair is putting the finishing touches to his own keynote speech, intended to refocus the debate on "the fundamentals" of the economy, health, education and crime - the issues to which Mr Blair believes the voters will return, and which will determine the election in Labour's favour.