The resignation of Alastair Campbell, Blair's communications director, was predicted late Thursday in a report by the BBC's respected political editor Andrew Marr, but was hotly denied by Downing Street.

"This is wishful thinking on behalf of the BBC. The BBC political editor (Marr) has not spoken to Alastair Campbell about this," a Downing Street spokesman said.

"It is the latest example of the BBC focusing on gossip rather than substance," the spokesman said.

The clash came as Blair faced his worst-ever political crisis in the fallout from the apparent suicide of British arms expert David Kelly, the source of earlier BBC reports that Campbell had spiced up the intelligence on Iraq.

Blair's chief spin doctor has repeatedly denied inserting into the September dossier a claim that Iraq could launch weapons of mass destruction within 45 minutes.

A parliamentary probe also cleared Campbell of exerting "improper influence" in the drafting of the file.

Marr told BBC News that he was "pretty sure" Campbell had decided he was going to leave Downing Street and had informed Blair of his intention to resign after the present political storm dies down.

Following Downing Street's denial, the BBC issued a statement sticking by Marr's report.

The Guardian newspaper suggested that Blair had convinced his trusted aide to stay on in intensive talks held hours after the prime minister returned Wednesday from a world-trip dogged by questions over Kelly's suicide.

Kelly's corpse was discovered last Friday in woods close to London as Blair was en route to Tokyo from Washington.

The defence ministry consultant was found with his wrist slashed, days after he was grilled by a parliamentary committee investigating the government's intelligence claims.

An open packet of painkillers was found next to his body along with a bladed instrument.

Police said Friday that the coroner had released Kelly's body to his family following the post-mortem but added they would not reveal the results of toxicology tests until a full inquest had taken place.

The British media has repeatedly shifted the finger of blame for his suicide, pointing alternately at the BBC, Campbell, Blair, and Defence Secretary Geoff Hoon, whose media strategy was reported to have led to Kelly being named.

Blair, who has seen his popularity plummet in opinion polls, has promised to "cooperate fully" with the judicial investigation into Kelly's death as he denied being responsible for "outing" the arms expert.

WAR.WIRE