Keeping up appearances can sometimes be hard for a regime that knows its on its way out. Tony Blair's damaging long goodbye will involve stretching that to the extreme this week, when a farewell party is held in the lavish surroundings of Lancaster House. Funded by the taxpayer from the Foreign and Commonwealth Office's entertainment budget, £6000 has been set aside by the foreign secretary, Margaret Beckett, to honour the services provided by the prime minister's special envoy to the Middle East, Lord Levy.

Lancaster House is no ordinary setting for a goodbye soiree, even for a noble lord currently on police bail and at the centre of the Scotland Yard investigation into Labour's cash-for-honours scandal. The venue was used by Merchant-Ivory when they filmed Henry James's The Golden Bowl. Levy's bash, like James's story, will involve a millionaire himself. And, like The Golden Bowl, a tale of a flawed, expensive gift and the shenanigans that go on to hide the deceptions associated with its giving, the cash-for-honours revelations have screenplay appeal.

But on Levy's big night, guests can expect five-star diplomacy and thus no mention of Levy's difficulties. The Foreign and Commonwealth Office will do all they can to pretend the party is a routine affair where the great and the good (probably assisted by something like a three-line whip on compulsory attendance) will gather to celebrate his Middle East diplomatic successes.

At such gatherings there are often television monitors placed discreetly around the main rooms, in Lancaster House's case the spectacular Grand Hall and the Music Room. A special programme of achievements'' is sometimes prepared, highlighting career successes. So what will the carefully invited guests see if the Levy achievements are being played, quietly, behind the clink of champagne glasses and carefully handled canapes? The latest bombing in Iraq? Street fighting in Gaza and the West Bank? Perhaps a speech from the Iranian president on how he intends to continue his country's nuclear programme? There will, I am told, be no such tape. The reasons given were that Levy worked behind the scenes'' for Tony Blair, that his achievements were personal and detailed and helped pave the way for other diplomatic triumphs. Such as? We can't be told, because they are personal.

Given the chaos in Gaza and the West Bank and the effective return to year zero in the Palestinian peace process, where talk is no longer of a two-state but perhaps a three-state solution, a champagne reception with a bill of six grand to celebrate illusory achievements is tasteless and politically insensitive.

But, strangely, it fits. It fits the illusion that in the handover between Blair and Brown the British electorate are being treated to a display of party democracy, rather than a roadshow of the meaningless. If Lancaster House is the film-set backdrop necessary to deliver a script that portrays Levy as an international diplomatic powerhouse rather than a millionaire pop mogul on police bail, then the endless nationwide hustings involving the six deputy leadership contenders, and the no-contest phoney election which has Gordon Brown campaigning for a ballot that won't take place because he's already won, are further evidence that we are being treated like a complicit audience in a magic show. There are political tricks and illusions on offer, but it's uncomfortable for us to admit we are being duped, and inconvenient for Brown and his six would-be sorcerer's apprentices to break their Magic Circle rulebook and tell us how the trick is actually being done.

Blair, still sorcerer in chief till June 27, came perilously close to giving the game away at Prime Minister's Questions last week. Speak to any decent magician and they'll tell you that part of the secret is keeping the audience's attention on one part of their trick while the manipulation is taking place elsewhere. Blair told the Commons in response to David Cameron branding the deputy leadership contest a cross between The Muppet Show and Big Brother that he was going to focus on the big picture'', in effect he was going to reveal part of the illusion. I say this with the greatest respect for all my colleagues who are standing for deputy leader, but the leadership is the important thing.'' If the Commons had the political equivalent of the Magic Circle or the Screenwriters' Guild, Blair would have been expelled for giving away a key secret of the craft. Since Blair announced he was going, Brown and the six challengers for the deputy's job have been touring the clubs and successfully maintaining the illusion that each husting, each debate, each Q&A session is an exercise in serious deep-rooted democracy. Then, in one sentence, Blair wrecks their roadshow; their smoke and mirrors and their card tricks revealed as a sham.

In the one contest that Blair said mattered, there has been no contest. Gordon Brown is the next prime minister. And while we know where the would-be deputies stand on Iraq, on whether they should be in the Cabinet, on what Labour should do with taxation before the next general election, on whether Labour under Brown should continue to focus on the centre or appeal to a disgruntled left, on whether New Labour reformed or deformed the NHS, we don't know where Brown will take his party. There has been no contest forcing him to reveal anything apart from banalities about fairness, opportunity for all, bringing the people together, education as his passion, the NHS his priority and faith in people.

Is this a democratic deficiency? Hilary Benn, international development secretary (one of the favourites, alongside education secretary Alan Johnson, to win the deputy leadership ballot) said there was no deficiency, simply because no-one had won enough votes among the Parliamentary Labour Party to challenge Brown. What Benn's simple answer doesn't throw light on is how Brown and his supporters did all they could to quash any prospect of a contest. The chancellor wanted an unopposed route to No 10. And he knew how to make that happen. Yet even on the day when he announced he would be standing'' for the premiership, knowing there would be no challengers, he kept up the illusion of a contest, saying I am a candidate'' rather than admitting that I am the candidate''.

So at glamorous Lancaster House this week, in a venue steeped in British political history, there will be celebratory toasts. There will a toast and a speech for Levy and his successes. There will be a toast, I am reliably informed, to the current prime minister and indeed to the next prime minister. But there should also be a toast to illusion, a toast to the parallels between government and the Magic Circle, and how it's important not to give away details of the trick.