Israeli intelligence and military officials are increasingly pushing for the assault on Gaza to continue until it assures the eventual downfall of Hamas amid assertions that the 10 days of military bombardment have crippled the Islamist party's ability to govern.

As the onslaught progresses, officials are more confident of "changing the equation" in Gaza and are predicting the collapse of the Hamas administration.

Last night, Israeli forces bombed the centre of Gaza, and there were reports of intense clashes with Hamas fighters on the edge of the city. But the fighting and the occupation of parts of the north and centre of the Gaza Strip did not stop Hamas from firing more than 40 rockets into Israel.

The death toll from 10 days of fighting has risen above 550. Those killed yesterday included 13 members of the same family killed in their house by Israeli tank fire east of Gaza city.

The Israeli military said early today that three of its soldiers were killed and four wounded when one of its tank shells was fired in error.

The rising number of civilian deaths is helping to drive growing diplomatic pressure for an end to the killing. The French president, Nicolas Sarkozy, on a visit to Jerusalem and Ramallah, yesterday called on Israel to stop the violence and demanded an immediate ceasefire by both sides. There was a similar call from an EU delegation in Israel.

But they were rebuffed by Israel's foreign minister, Tzipi Livni, who said: "When Israel is being targeted, Israel is going to retaliate. Israel is going to give an answer to it because this is an ongoing, long battle, war, against terror."

Livni's determination reflects a growing confidence in the upper echelons of the Israeli establishment that the assault will fatally damage the foundations of Hamas's control and, in time, drive it from power. Intelligence and military officials have told the cabinet that "not much" remains of the Hamas administration in Gaza and that its ability to take control again has been undermined by the destruction of a large part of the physical infrastructure of administration, including the parliament building and many government offices.

The intelligence services also told the cabinet that they believe the Israeli bombardment is turning Palestinian popular opinion against Hamas and that terms can be forced on the Islamist party that will further weaken its control.

Israeli officials have generally been reluctant to say that the attack on Gaza is intended to force Hamas from power out of concern that it would undermine the international support they have won by portraying the assault as a purely defensive measure to stop Hamas rockets.

Last week, Israel's deputy prime minister, Haim Ramon, and the leader of the Shas religious party, Eli Yishai, walked out of the cabinet meeting that approved the invasion of Gaza because it did not specifically call for the toppling of the Hamas administration. After Ramon told Israeli television that what "we need to do is to reach a situation in which we do not allow Hamas to govern", other government members denied that was the intent.

But Livni yesterday said Hamas's continued control of the Gaza strip was "an obstacle" and that Israel was seeking an agreement that "weakens it".

The head of the Shin Bet internal security service, Yuval Diskin, told the Israeli cabinet that Hamas was finding it increasingly difficult to govern with its leadership in hiding from Israeli rockets and much of its infrastructure blown to pieces.

He was backed by the chief of the general staff, Lieutenant General Gabi Ashkenazi, who said "not much" remained of the Hamas government, and by the head of military intelligence, Major General Amos Yadlin. "Hamas has absorbed a very hard blow ...

Its ability to govern has been harmed, its leaders have completely abandoned the population and are only worrying about themselves," Yadlin told the cabinet.

He said Hamas was increasingly isolated, both internationally and from the Palestinian population.

Hamas leaders remained defiant yesterday with the party's political head in Gaza, Mahmoud Zahar, saying it would fight on "in the name of God". He said in a speech broadcast in Gaza: "They legalised for us knocking down their synagogues when they hit our mosques, they legalised for us knocking down their schools when they hit our schools."

Hamas leaders have been assassinated and driven underground before, and the organisation has generally emerged fortified and more radical. Israel has also pursued these tactics in the past and failed to curb Hamas's influence or the rocket attacks. But whether or not the Israeli military and intelligence leaderships' claims to the cabinet are overstated, they reflect a strengthening intent to bring down Hamas.

Livni told the cabinet that a diplomatic agreement for a ceasefire should weaken Hamas politically. "This is not a matter of an isolated operation and every arrangement should advance the interests of the state of Israel vis-à-vis Hamas. There is no intention here of creating a diplomatic agreement with Hamas. We need diplomatic agreements against Hamas, and any agreement that weakens it is positive in our eyes," she said.

Israel wants foreign powers to impose terms on Hamas that would in effect require it to submit to the authority of the Palestinian president, Mahmoud Abbas, and the Palestinian Authority, which was driven from the territory in bloody internal fighting two years ago.

Diana Buttu, a Palestinian negotiator involved in talks with Israel over its 2005 withdrawal of settlers from Gaza, said the Israeli assault had strengthened short-term solidarity with Hamas, but was likely to have weakened the group politically.

"People in Gaza are under assault right now so they're going to support Hamas. But when the dust settles I think we'll get a very different perspective, a lot of questioning about whether Hamas has the right strategy.

"I think what's going to happen will be similar to what happened when [Yasser] Arafat was besieged in the mukata [the Palestinian presidential compound] in 2002. People who were very critical of Arafat before said 'we're supporting him 110%.' A few weeks later ... you started to get the introspection of 'is this really what we need, is this really what we want?'"

Israeli troops and tanks moved into Gaza's second largest city, Khan Younis, for the first time today under intensive artillery strikes as the military pledged to press on with its attack.

The heaviest fighting has been in northern Gaza, with witnesses reporting wave after wave of bombing strikes across the north of the territory accompanied by gunfire from helicopters and artillery from land and sea. Thousands of Palestinians have been ordered to leave their homes or forced to flee the fighting.

Artillery fired from naval ships in the Mediterranean killed 10 Palestinians this morning in Deir al-Balah, in the centre of the Gaza strip, according to Palestinian medical workers. In Shajaiyeh, east of Gaza City, Israeli troops seized control of three apartment blocks and set up gun positions on the rooftops. Residents were locked in their homes and soldiers confiscated their mobile phones, neighbours said.

Late last night three Israeli soldiers were killed and 24 were wounded, four seriously, when they were accidentally hit by an Israeli tank shell. They were the most serious casualties suffered by Israeli forces since they began their ground offensive on Saturday night, and came when the tank mistakenly fired on a building where the soldiers had taken positions.

There was heavy artillery fire to cover the evacuation of the injured, who included the commander of the Golani infantry brigade, one of Israel's key fighting forces.

Israel's defence minister, Ehud Barak, said his country's troops had not finished their operation despite mounting Palestinian casualties and growing international calls for a ceasefire.

"Hamas has so far sustained a very heavy blow from us, but we have yet to achieve our objective and therefore the operation continues," Barak said.

The Israeli foreign minister, Tzipi Livni, said the offensive was intended to change permanently the shape of Israel's conflict with Hamas. "When Israel is targeted, Israel is going to retaliate," she said. Israel has rejected calls for a ceasefire.

The military said it had bombed more smuggling tunnels across the border with Egypt in the south and hit more than 40 other sites across Gaza including buildings storing weapons and rocket launching areas.

As Israeli troops and tanks pressed deeper into Gaza, the toll of civilian casualties rose rapidly. The UN said at least 94 Palestinians had been killed since the ground offensive began on Saturday night. In one incident yesterday a house in Zeitoun, south-east of Gaza City, was hit by tank shells killing at least nine people, including at least four children. In the Shamali district, north of the city, an Israeli bomb destroyed a three-storey house killing a family of seven, including four children.

In total, at least 550 Palestinians have died since Israel's operation began, with more than 2,500 injured. Hospitals have been overwhelmed; morgues were crowded with bodies, and injured patients had to be treated in hallways. On the Israeli side eight people, including five soldiers, have died and about 60, mostly soldiers, have been hurt.

The Israeli military said it had killed 130 "Hamas terror operatives" in the past two days, although there was no way to confirm that figure. At least 80 Palestinians have been detained, interrogated and taken into Israel.

In Gaza, Mahmoud Zahar, the most senior leader of Hamas in the strip and a hardliner in the movement, appeared on the party's al-Aqsa television station and gave a defiant speech threatening attacks not only in Gaza but elsewhere.

"The Zionists have legitimised the killing of their children by killing our children. They have legitimised the killing of their people all over the world by killing our people," Zahar said. He urged Hamas fighters to "crush your enemy".

Another Hamas figure, a recognised military spokesman called Abu Ubaida, said thousands of Hamas fighters were waiting in Gaza to take on the Israeli military and said rocket attacks would increase.

More than 40 were fired into southern Israel yesterday, including one that landed in an empty kindergarten, which has been closed since the conflict began, like all schools near the Gaza border. Israeli police said a total of 520 rockets had been fired in the past 11 days of fighting.

Israeli troops are now deployed in and around the major urban areas of Gaza, particularly in the north, including Beit Hanoun, Beit Lahiya and Jabaliya. They have ordered residents in many areas to leave their homes with leaflets, telephone calls and radio announcements, forcing at least 15,000 Palestinians to flee to safety elsewhere. At least 5,000 are staying in 11 different UN schools and shelters.

The UN said more than 1 million Gazans were still without electricity or water and that it was increasingly difficult for staff to distribute aid or reach the injured. It said more industrial diesel was needed to reopen the strip's sole power plant, which has been shut for a week. Ten transformers have been damaged in the fighting.

More wheat grain is needed for food handouts and the UN said Karni, the main commercial crossing, should be reopened to allow it in. Four ambulances and three mobile clinics were destroyed when bombs hit the headquarters of the Union of Health Care Committees in Gaza City.

John Holmes, the UN emergency relief co-ordinator, said Gaza represented an "increasingly alarming" humanitarian crisis and said the territory was running low on clean water, power, food, medicine and other supplies since Israel began its offensive. Israeli leaders claim there is no humanitarian crisis.

Mahmoud Khalil looked around the classroom and decided the safest place for his children was under the desks.

UN officials had reassured the father of five he and his family would be protected by the large blue and white flag flying above the UN-run school turned refugee shelter. But with the sound of large explosions on the edge of Jabaliya refugee camp, just north of Gaza City, and his children still terrified from the trauma of their escape, Khalil was taking no chances.

"They will kill us anywhere. If they can bomb the mosque, if they can kill small children, if they can blow up our parliament, why should they care if they bomb this school? They don't care what the United Nations thinks. They don't care what the whole world thinks," he said, when reached by telephone.

The 38-year-old mechanic arranged a cluster of desks in the corner of the classroom and laid blankets on the floor under them for his children - the youngest three years old, the eldest 14 - to lie on.

"God willing, that will protect them," he said. "They are terrified after what they have seen. Explosions near our house. Everybody running away. The Israelis dropped leaflets and said on the radio we must all get out or they will kill us because they are going to bomb our houses."

But where to flee? In other conflicts refugees move across borders or to quieter regions. But Gaza's 1.5 million residents are trapped behind the long Israeli fence, dotted with machine gun posts and watchtowers, that makes their home a prison. There is no way out.

So Khalil and his children, like thousands of other Gazans, settled for what they could find - schools run by the UN Palestinian refugee agency that have flung their doors open as shelters from the Israeli assault that is claiming more lives by the hour. By last night 17 schools had been turned into shelters with more than 5,000 people seeking protection inside. Nine of the schools are in Jabaliya refugee camp on the front line of the fighting.

Adnan Abu Hasna is an official with the UN's Palestinian refugee agency who visited several of the schools yesterday. "I found hundreds of people are fleeing their homes just in the Jabaliya area. There's a lot of fear, a lot of panic. You can see it with the children too," he said. "We are talking about Gaza as a very tiny area. Where do they go? We are talking about very poor areas. People arrive without anything. We are providing them with mattresses, blankets and certain amounts of food. We try and give families privacy where the schools are not too crowded. But there are huge numbers coming in some areas."

Besides the schools in Jabaliya, three others have been turned into shelters in Gaza City, one in Rafah, in the south of the strip, and a handful of others scattered around. But Hasna says there will be more, although he is only marginally more confident than Khalil that the UN flag will provide protection.

"We depend on it being a UN installation with a big flag. We hope the Israelis will respect that. We are contacting them and telling them," he said.

Israel's foreign minister, Tzipi Livni, is trying to persuade the world that there is no humanitarian crisis in Gaza. UN officials scoff at the claim, noting that 1 million people are living without electricity and 250,000 without running water. And then there are the bombs and rockets, terror and trauma.

Khalil has given this some thought. "When Hamas fires rockets into Israel, the Israelis say they are scared and run away," he said. "I'm not saying Hamas is right or wrong. But I believe the Israeli people are scared because the rocket can hurt them or their children. So they run away to Tel Aviv where they have food and electricity and they are safe and Israel says that is a humanitarian crisis. But we who are trapped here with no electricity and water and our children hearing bombs and screaming and holding each other, they say this is not a humanitarian crisis."

The Obamas settled into their first day in Washington yesterday, with daughters Sasha and Malia attending their new school and the president-elect trying to inject a sense of urgency into congressional ­leaders about tackling the recession.

The first family took up residence in the capital early, staying at the historic Hay-Adams hotel opposite the White House, so the children could start school on time.

Michelle Obama, who flew into Washington with the girls on Saturday, with the president-elect following a day later, accompanied Sasha, seven, to the Sidwell Friends school's campus in Bethesda, Maryland, on the outskirts of the capital. She then took Malia, 10, to the main Sidwell campus in the city.

Barack Obama's team released pictures of the family in their hotel suite dressed for school.

The president-elect left three hours later in a motorcade to Capitol Hill for talks on his economic stimulus package in Congress, which starts today. In keeping with his campaign promise to adopt a bipartisan approach, he met Democratic and Republican leaders.

He had pressed Congress to have a bill ready for signing on his desk on 20 January but congressional leaders dampened his hopes, saying there was little prospect of such a bill being ready before the middle of February. "The reason we're here today is because the people's business can't wait," Obama told reporters.

His proposals, not surprisingly, were welcomed by the Democrats. Republican leaders gave a mixed response, saying they welcomed proposed tax cuts but were concerned about the overall size of his stimulus package.

Obama is proposing a package totalling between $675bn (£462bn) and $775bn, of which up to $300bn would be in tax cuts. Single workers are to receive $500 each in cuts, while businesses will get in total more than $100bn of the funding.

The scale of the proposed tax cuts will disappoint some liberals, who have been looking for huge New Deal infrastructure projects that would help create jobs.

While the economy is Obama's top priority, other problems are beginning to pile up, including finding a replacement as commerce secretary for Bill Richardson, who withdrew from the post on Sunday because of an investigation into a business deal in his home state of New Mexico, where he is the governor.

One of the few other remaining vacancies ? head of the CIA ? was filled yesterday. Democratic officials said Obama had chosen Leon Panetta, former White House chief of staff to Bill Clinton and a Democratic congressman. In an early taste of troubles ahead with Congress, Dianne Feinstein, the Democratic chair of the Senate select committee, was dismissive of Obama's choice of Panetta. Saying she had not been informed of the selection, she hinted she was unhappy over his lack of experience: "My position has consistently been that I believe the agency is best-served by having an intelligence professional in charge at this time."

Retired admiral Dennis Blair is Obama's choice to be director of national intelligence, according to Democratic officials.

The Obamas take up occupancy of the White House at midday on 20 January. The president-elect was in nostalgic mood on the plane taking him to Washington after locking up the family home in Chicago on Sunday. "Malia's friend had dropped off an album of the two of them together," Obama said. "They had been friends since preschool and I just looked through the pages and the house was empty and it was a little tough, it got me."

Britain's leading green commentator, George Monbiot, goes head-to-head with the chief executive of oil giant Shell, tackling ethics, greenwash advertising, renewable energy investments and gas-flaring in Nigeria

House prices fell by 15.9% in 2008, Nationwide said today - the biggest annual drop since the society began publishing its index in 1991.

December saw a 2.5% fall in prices - the second biggest monthly fall of the year after May, when prices were down 2.6%. The drop follows a 0.4% fall in November, which seemed to suggest the rate of decline was easing.

The snapshot of house prices from the UK's biggest building society showed that by the end of last year the average price of a UK home had fallen by £29,000 to £153,048.

Nationwide's figures are broadly in line with those published last week by the UK's largest lender, Halifax.

It reported that prices had dropped by 16.2% over the course of last year, with a 2.2% fall in December alone. Its index put the average price of a home at the close of last year at £159,900 - 20% below its peak in the summer of 2007.

Nationwide's chief economist, Fionnuala Earley, said 2008 had been a "year of turmoil" in the UK housing market.

"The disruption in the financial markets worsened throughout 2008 and had larger implications for the real economy than we anticipated a year ago.

"This time last year we expected the housing market to cool quickly as affordability was poor and economic conditions looked set to weaken, but we did not anticipate the speed of house price falls or the extent of the global and domestic economic slowdown."

Last month, the society said it would be ditching its annual forecast for house prices as a result of the uncertain economic outlook.

Earley today reiterated that position, saying volatile conditions made it more difficult than usual to estimate what would happen to the market over the coming year.

"In these unsettled times a forecast subject to frequent change could itself add to greater uncertainty," she said.

However, she said that tighter lending conditions and the fact that homes remained unaffordable for some people suggested prices would have to fall further before significant numbers of buyers returned to the market.

"In terms of house price expectations, current sentiment of borrowers and lenders is still fairly low," she said.

"Until the economy and the labour market stabilise, it is hard to imagine households becoming upbeat about the immediate future for house prices and this will hinder the pace of recovery."

Looking ahead

Nationwide said prices had fallen in all regions of the UK during 2008, although the rate of decline varied hugely. While Northern Ireland recorded a 34% drop in prices, the Scottish market dropped by just 8%.

In England the largest fall was in East Anglia, where prices were down by 16.6%, followed by London and the south-east where prices dropped by more than 15%. The smallest drop was in the north of the country, where prices were down 11% year-on-year.

Howard Archer, chief UK economist at IHS Global Insight, said the figures completed "a dismal year" for the housing market.

He predicts that prices will fall by a further 15% this year, taking the average to £130,091 on Nationwide's measure, and said the data increased the likelihood of further large interest rate cuts.

"The ongoing deep problems of the housing market maintains pressure on the Bank of England to deliver another deep interest rate cut on Thursday, although mortgage lenders are likely to be increasingly unwilling to pass on much of any further interest rate cuts," he said.

David Cameron took the side of savers hit by tumbling interest rates yesterday and promised to abolish tax on the savings income of all basic-rate taxpayers. He also promised to lift personal allowances for pensioners by £2,000 a year.

Pounded by Labour charges of offering a do-nothing approach to the crisis, the Tory leader said that he wanted to help the "innocent victims" of the recession.

Cameron also toughened his approach to public spending, by proposing for the first time that its growth in the financial year 2009-10 be cut from 3.4% to 2.6%, saving £5bn. Setting out a plan for Conservative government, he said spending on schools, health, defence and international development would be maintained at Labour's planned levels, meaning projected spending in other departments could grow only 1% in real terms, instead of the 4.1% planned by Labour. Cameron said he did not think 1% unreasonable.

But his move imposes tight constraints on departments such as the Home Office, Ministry of Justice, business department, and communities department. George Osborne, the shadow chancellor, pointed out that public spending would still be rising by £25bn under the Tory regime, as opposed to £30bn, leading Tory rightwingers to claim that Cameron was not doing enough to break with Labour spending or borrowing.

The chief secretary to the Treasury, Yvette Cooper, said it was "economic madness" to slow public spending - the Conservatives were isolated internationally, she claimed. Downing Street was last night pointing to reports that Germany is planning a £50bn fiscal stimulus.

But Cameron is increasingly bold in advocating tighter spending, and has already proposed a lower level than the government plan for 2010-11. The country, he said, was facing a "catastrophic legacy of debt and disrepair"; he sometimes wanted to shake Gordon Brown, he said, to get him to understand his errors.

Cameron put his proposals in the context of a wider claim about the need for an economy that is more balanced, and not so tilted towards housing, the public sector and financial services.

He published reports on creating green technology incubators, and buidling the world's first trading market for environmental companies. He also revealed a review into how to give every home ultra-fast broadband within a decade. Brown is proposing a green and digital infrastructure renewal programme this spring.

The Tory leader's move came ahead of Thursday's meeting of the Bank of England monetary policy committee, expected to cut interest rates to possibly 1%, the lowest since the Bank's formation in 1694. A cut from the current 2% would further damage the interests of savers when savings are at their lowest for 50 years.

Cameron said: "We need to make a really big change in Britain from an economy built on debt to an economy built on savings. A culture of thrift at the heart of government and a culture of saving at the heart of our economy - these changes will provide strong foundations for the new economy we plan to build."

Privately, the Tories accept that the cost, and therefore the impact, of abolishing tax on savings for basic-rate taxpayers - £2.6bn - may be too high, since it is based on estimates made at a time when interest rates were much higher.

The proposal to lift tax on savings income would, the Conservatives say, simplify the tax system, since banks would no longer have to withhold 20% of interest income at source, and people on low incomes who currently do not pay tax at 20% would no longer be forced to apply for their money back.

In practice, a third of savers already have their savings in tax-free Isas, and yesterday's initiative by the Tories may prompt Brown (planning a tour of English regions starting tomorrow) to raise the maximum amount of income that can be invested in an Isa tax-free, currently £7,200.

The Tories denied that helping savers would take money out of the economy. They argued that advisers to the Obama administration are suggesting that tax cuts are three times as effective at raising growth as spending increases.

More broadly, Cameron insisted he was optimistic that his policy package was winning converts: the government's 2.5% VAT cut in December had been "a criminal waste" of £12.5bn of taxpayers' money, saying the government might as well have burnt the cash.

Cameron also repeated his call for a government insurance scheme to back banks lending to customers and businesses. The Treasury is looking at a similar scheme, but the government will be determined to present any proposal as sharply different to the Conservatives' socialisation of credit.

Parties' policies

Labour plans

? Cut VAT by 2.5%at cost of £11bn to stimulate demand.

? Consider second round of help for banks following £50bn recapitalisation, but put the idea of more government cash for banks on the back burner.

? Create 100,000 jobs by advancing extra capital investment directed at green jobs and school building.

? Publish interim report on digital Britain.

? Encourage ailing firms to switch staff to part-time work and allow staff to train for remainder of time.

? Consider bringing forward extension of school leaving age.

? Allow mortgage holders in difficulty to have a two-year interest rate holiday.

? Consider help for savers in March budget.

Tory plans

? £50bn national loan guarantee scheme to help free up credit for business. Focused on short-term credit lines, overdrafts and trade credit - the lifelines all businesses need to keep afloat.

? £3bn tax breaks to reward companies who take on new staff.

? Small businesses to enjoy six-month VAT holiday.

? An environmental stockmarket, where green companies are listed and traded.

? No tax to be paid on savers' incomes for basic rate taxpayers. Help 5 million taxpaying pensioners by increasing personal allowances.

? Commission report on how UK households will have access to high-speed broadband internet within next 10 years.

"Oh my God." Her hand covered her mouth. She glanced at him in desperate panic. "They filmed me kissing you. And it's up on the giant screens." Her voice rose, her cheeks were scarlet, and her reluctant glance towards the stadium ended in a moan of disbelief. "Oh God, I can't believe this ... and my hair is all over the place and my bottom looks huge, and - everyone is looking."

His eyes on the pitch, Prince Casper watched with cool detachment as his friend, the England captain, hit a post with a drop-goal attempt. "More importantly, you just cost England three points."

Rugby and romance are perhaps not the most obvious of combinations, but one that the world's biggest romance publisher, Mills & Boon, and the Rugby Football Union believe will bear fruit. The pair have teamed up to publish a series of books featuring tall, dark and handsome rugby heroes - minus cauliflower ears - and their glamorous love interests.

"Our mission statement is to do for rugby what Jilly Cooper did for polo - to give it an air of sexiness and glitz and glamour," said series editor Jenny Hutton. "You don't have to like rugby to like the books," added Clare Somerville, Mills & Boon's sales and marketing director. "They've got all the elements of a quintessential Mills & Boon romance: jet-set locations, hunky alpha male heroes and hot sex, but in a rugby context."

Information on the rules of rugby for the non "rugby savvy", along with tips on what to wear at matches, will also be included, she said.

The RFU International Billionaires series launches with The Prince's Waitress Wife - in which one sex scene takes place in the president's suite at Twickenham - on 1 February, just before the start of the RBS Six Nations Championships.

In a later title, The Ruthless Billionaire's Virgin, the heroine stands in to sing the national anthem, only to suffer a "wardrobe malfunction" from which she is saved by the chivalrous hero.

But readers should not expect guest appearances from real-life players such as Lawrence Dallaglio. "We made a decision early doors that that wasn't going to happen," said Jane Barron, licensing and marketing manager at the RFU. "There are no real people - it's all imaginary."

? Can you do better? Write your own at guardian.co.uk/books/booksblog

Tony Blair is to receive the United States's highest civilian award, the Presidential Medal of Freedom, from his friend George Bush next Tuesday, at a White House ceremony during the latter's last week in office.

The medal, a five-pointed white star, was first introduced by President Harry Truman just after the second world war and later revived to reward eminent citizens for distinguished service in peacetime by president John F Kennedy.

Although among its previous 400 recipients there are American figures such as Frank Sinatra, Doris Day, Bob Hope, Danny Kaye and Arnold Palmer, it has also been presented to every post-war president and to senior politicians and military men.

The medal is awarded "for especially meritorious contributions to security or the national interests of the United States, world peace or cultural or other significant public or private endeavours". It was not immediately clear last night under which heading the former prime minister had qualified. He is only the second British prime minister to receive the award, following Margaret Thatcher in 1991, though other recipients have included Lord Carrington, the former foreign secretary, and Lord Robertson, former defence secretary and secretary general of Nato.

Blair will find himself among others he will recognise. Donald Rumsfeld received the medal in 1977 for his original period in administration service; vice-president Dick Cheney got his in 1991; and President Bush has previously awarded other prominent figures involved in the Iraq campaign - Paul Bremer, the US's former director in Baghdad, General Tommy Franks, and George Tenet, former director of the CIA.

Blair was previously also awarded the US's other highest civilian honour, the Congressional Gold Medal, in 2003, for his support of the US invasion of Iraq, though he has never collected it.

He will receive next week's award alongside John Howard, the former Australian prime minister, and Álvaro Uribe, the president of Colombia. A White House spokeswoman said the three were being honoured by the president "for their efforts to promote democracy, human rights and peace abroad".

The award was criticised by the Lib Dems, but Blair's spokesman said he regarded the medal as reflecting the courage of the British armed forces.

The renegade Wall Street financier Bernard Madoff is battling to stay out of prison after allegedly breaking his bail conditions by distributing $1m (£700,000) worth of jewellery and personal possessions to his friends and relatives.

Federal prosecutors in Manhattan yesterday asked a judge to jail the 70-year-old fund manager for an "obstruction of justice" in violating an order which froze his assets. The judge deferred a ruling pending written pleadings.

The courtroom revelation emerged as US congressmen roasted senior regulatory officials in Washington for failing to detect corruption in Madoff's $50bn investment empire. Trustees have sent out 8,000 claim forms to Madoff's clients who hope to recover a sliver of their lost money.

Leaving the New York penthouse apartment where he has been under house arrest since mid-December, Madoff arrived in court to hear US prosecutor Marc Litt describe him as a potential flight risk. "The case against the defendant is strong and it's getting stronger," Litt told magistrate judge Ronald Ellis.

Prosecutors said Madoff and his wife, Ruth, had sent at least five items including "very valuable jewellery" to their children and unidentified friends in Florida.

But Madoff's lawyer, Ira Sorkin, said the items had been sent before an asset freeze came into effect. He said the possessions were not significant, describing them as heirlooms including cufflinks and an antique watch.

"It happened innocently," Sorkin told the court. "He's not a threat to the community and there's no danger he's going to flee."

At a hearing on Capitol Hill, the head of the Securities Investor Protection Corporation gave some hope to victims of Madoff's scam by revealing that trustees have identified $830m of liquid assets from his firm, on top of $29m already recovered from banks - still a small slice of the $50bn that clients believed was in the fund.

Regulatory chiefs were given short shrift by members of the House financial services committee. Gary Ackerman compared the SIPC and the securities and exchange commission to "Keystone cops" and said watchdog agencies had failed to watch out for anybody.

Brad Sherman, a Democrat from California, called on the SEC's five commissioners to quit: "You would think all members of the SEC should at least offer President Obama a resignation and let him decide."

China arrested almost 1,300 people on state security charges in the restive north-western region of Xinjiang last year, state press has reported.

The figure, which was announced at an official meeting in late December, is nearly double the total of similar arrests for the whole of China in 2007. It has startled outside experts who say the figure has yet to be verified.

The Procuratorial Daily reported that the arrests came as the government made "maintaining social stability" a priority, with Beijing's hosting of the Olympics. A wave of attacks ? blamed by officials on Uighur separatists ? broke out days ahead of the games.

They included a raid on police headquarters in Kashgar which killed 17 ­officers. Two Uighur men were sentenced to death for the crime last month.

About half of Xinjiang's 19 million inhabitants are Uighur Muslims, who complain that the central authorities have stripped them of religious and cultural freedoms.

The newspaper said 1,295 people were arrested on suspicion of endangering state security last year. All but 141 were formally charged and faced trials or administrative punishment. It added that judicial authorities were ordered to "strike hard on the three forces of terrorism, separatism and religious extremism that endanger state security".

The charge of endangering state security applies to alleged subversion or "splittism" and its incitement, as well as to offences such as espionage.

Xinjiang officials refused to comment when the Guardian asked if the figures were correct.

Nicholas Bequelin, an expert on Xinjiang at Human Rights Watch, said: "The numbers are so incredibly high that this would be a real turning point [if correct]. It is possible they are talking about the total number of convictions under the campaign against the 'three evil forces', including things such as illegal religious assembly. About half the state security arrests in previous years were from ­Xinjiang; that was already high."

He added that the antiseparatist campaign weighed heavy on Uighurs. "It's not a yellow line that you should not cross ? they have to positively demonstrate their opposition to separatism; they have to say so publicly in meetings and study sessions."

Critics accuse the authorities of using claims of terrorism to suppress peaceful support for independence and wider expressions of cultural identity in ­Xinjiang over decades.

But restrictions have tightened noticeably in the wake of last summer's violence. During Ramadan last year several areas ordered officials to deter mass prayers or banned government employees and Communist party members from fasting, wearing veils or growing beards.

Last spring the US-based Dui Hua Foundation, which intervenes on behalf of ­Chinese detainees, reported that nationwide arrests for endangering state security rose to 742 in 2007 ? the highest number for eight years. It added that political arrests had doubled between 2005 and 2006.

The foundation said the charge, which replaced that of "counter-revolution" following legal reforms in the 90s, was primarily aimed at suppressing political dissent.

State media reported today that the authorities had fined three British geology students 20,000 yuan (£2,000) for "illegal map-making activities" in Xinjiang. The students, from Imperial College London, had been researching fault lines with the permission of China's Earthquake Administration.

French president Nicolas Sarkozy's controversial cultural revolution of the country's television industry began last night as public service broadcasting (PSB) channels scrapped evening primetime advertising, amid an outcry from journalists and strike action planned for this week.

Described as a "big bang", Sarkozy's plans to transform state broadcaster France Télévisions have sparked protests by journalists and 80 hours of heated rows in parliament. Critics have likened him to Italy's Silvio Berlusconi for trying to wrest control of the nation's airwaves.

Sarkozy studied the BBC model before declaring advertising would be gradually banned from France's five state channels by 2011, beginning with primetime. He claims scrapping advertising would free state television to be more creative and public service-minded. But journalists' unions are concerned over the potential loss of advertising funding for PSB. Opposition politicians said Sarkozy was handing a gift to his media baron friends in French commercial television, who would reap huge financial benefits as advertising is transferred to their channels.

Last night from 8pm more than 20 million French primetime viewers were able to watch PSB channels without the traditional 20-minute block of advertising between the end of the evening news at 8.30pm and the start of evening entertainment programming at 8.50pm. Advertising on PSB channels will now stop at 8pm and start again at 6am the following day.

This advertising window, which dominates all main French television channels, is crucial in a country where far more people watch evening television news than buy newspapers. Around 40% of French people eat dinner while watching the 8pm television news.

Sarkozy plans to make up the loss of funds by taxing commercial television advertising revenue and introducing a tax on internet and telephone providers, resulting in €450m (£400m) of funding for 2009.

But journalists say budgets will suffer. Staff at France Télévisions' France 3 network launched strike action, disrupting production of news bulletins.