LONDON (Reuters) - Tony Blair, battling to shake off the damaging controversy of the Iraq war, warned Britain on Friday of the "mortal danger" of underestimating the terror threat and defended pre-emptive military action where necessary.

Blair said the row over the war -- that has sent his once unassailable public trust ratings plummeting -- would never go away but he insisted that what he called the most divisive decision of his political career had been right.

"We are in mortal danger of mistaking the nature of the new world in which we live," Blair told an audience in his northeastern constituency of Sedgefield.

"The true danger is not to any single politician's reputation, but to our country if we now ignore this threat" from non-conventional weapons, he added.

Blair's decision to back the U.S.-led war on Iraq has been savaged by former government ministers, political opponents and former chief United Nations arms inspector Hans Blix following the failure to find any weapons of mass destruction in Iraq -- the primary Anglo-American motive for war.

Blair on Friday called the row over the war "an elaborate smokescreen," saying the real issue was trust, not judgment.

The prime minister said his judgment -- before the war and now -- was that the risk of illegal weapons falling into the hands of rogue states could not be ignored and he signaled he would take pre-emptive action again in the future, if necessary.

"This is not a time to err on the side of caution," he said.

"Containment will not work in the face of the global threat that confronts us. Emphatically I am not saying that every situation leads to military action. But we surely have a duty and a right to prevent the threat materializing.

"This war is not ended. It may only be at the end of its first phase," he added.

Blair called for a reform of the U.N. so it can act against the terror threat, not just debate it. He also questioned the framework of international law that bans military intervention unless a situation qualifies as a "humanitarian catastrophe."

Charles Kennedy, leader of the opposition Liberal Democrats, suggested Blair was following Washington into a doctrine of pre-emptive strikes and was turning his back on the U.N.

Despite being cleared of exaggerating the intelligence on Iraq's weapons by an independent inquiry in January, the Iraq aftermath has continued to dog the prime minister.

Blix on Friday added his voice to the latest controversy on Iraq, arguing in Britain's Independent newspaper that previous U.N. resolutions did not provide the legal basis for war.