President Bush vowed to bring democracy to Iraq and the wider Middle East, as he stressed the US-led coalition was not looking for an early exit from Baghdad.
"We did not charge hundreds of miles into the heart of Iraq and pay a bitter cost of causalities and liberate 25 million people only to retreat before a band of thugs and assassins," he told an audience of foreign policy and defence experts in London’s Banqueting House.
In the only keynote speech of his state visit to Britain, the President stressed the "three pillars" on which he believed the peace and security of the free world were based.
These were vigorous multi-lateral institutions such as the United Nations and Nato, the willingness to use force to overcome tyranny as a last resort, and the spread of democracy across the world.
Mr Bush also stressed his commitment to the Middle East peace process, repeating his call for a viable independent Palestinian state and the recognition of Israel, secure within its own borders, by its Arab neighbours.
The President also heaped praise on the strength of the transatlantic alliance with Britain, and on Tony Blair.
Mr Bush insisted that the US would not pull out of Iraq or Afghanistan until democracy was entrenched in those countries.
He said: "We will meet our responsibilities in Afghanistan and Iraq, by finishing the work of democracy we have begun."
Mr Bush, who was given a standing ovation for his 40-minute speech, said it was time for the West to take a more critical attitude towards regimes in the Middle East.
He said that in the Middle East "we will consistently challenge the enemies of reform and confront the allies of terror. We will expect a higher standard from our friends in the region."
Mr Bush acknowledged that the movement of Middle Eastern countries towards democracy would not be achieved overnight.
But he added: "That is beginning to change. In an arc of reform from Morocco to Jordan and Qatar, we are seeing elections and new protections for women and the stirrings of political pluralism.
"Many governments are realising that theocracy and dictatorship do not lead to national greatness. They end in national ruin."
Mr Bush joked about the hostility that his visit has sparked. Some of those demonstrating would have preferred him to be housed in a glass box over the Thames, like David Blaine, the American magician, than in Buckingham Palace.
Mr Bush was officially welcomed earlier today with regal pomp and muted protests, but there was intense embarrassment after an undercover reporter breached security at Buckingham Palace, where the President is staying.
Mr Bush’s visit was taking place amid unprecedented security with concerns of disruption by anti-war protesters as well as fears of a terrorist attack.
However the Daily Mirror revealed this morning that Ryan Parry, one of its reporters, spent two months working as a footman, having used a false reference to get the job, as royal officials and police prepared for the Presidential visit.
Palace officials launched an urgent inquiry into the matter and David Blunkett, the Home Secretary, was moved to make an emergency statement to MPs.
Mr Blunkett told the Commons that Tony Blair had ordered a comprehensive review of Palace security after the incident.
During the official welcome at the Palace it was all smiles and formality as the military bands played and Royals and politicians shook hands with Mr Bush.
Outside, behind the crowd control barriers, there were protests from opponents of the war in Iraq and other groups against the state visit.
But the demonstrations were relatively low-key with the main rally expected tomorrow.
Mr and Mrs Bush, who arrived yesterday, stayed overnight at the Palace before the ceremony.
After breakfast, they boarded a presidential motorcade to drive the 100 yards or so from the palatial Belgian Suite to the Palace forecourt.
There they were greeted by the Royals, who were also driven from the Palace to the ceremonial stand, Tony Blair, military top brass, the Metropolitan Police Commissioner and civic dignitaries.
Colin Powell, the US Secretary of State, among the American VIPs at the ceremony, was so impressed that he used his own pocket camera to capture the occasion.
Outside the palace gates, the silence during the 41-gun salute was broken by protester Joe Gittens who shouted anti-war songs and branded Tony Blair a "poodle".
As The Star Spangled Banner was played he began singing "Yankee Poodle Tony" to the tune of Yankee Doodle Dandy.
Two police officers approached him and took him to one side and said that if he continued he could be arrested. Mr Gittens said: "I am just protesting against the war. It is outrageous that President Bush is here."
Elsewhere, a series of demonstrations began in quiet but colourful fashion with a mock state procession.
Peace campaigners dressed as the President and the Queen in a horse-drawn carriage headed a procession which also included a pink "love tank" and demonstrators dressed as weapons inspectors and Guantanamo Bay detainees.
Around 200 protesters gathered at Jubilee Gardens on London’s South Bank for the colourful parade which was due to finish at Trafalgar Square.
Some campaigners expressed disappointment at the modest turnout but Aiden Hutton from Suffolk, who played the role of George Bush, said: "There have been about 14,000 police, I think that’s a wonderful turnout."
The Stop the War Coalition was hoping that 100,000 demonstrators would turn out tomorrow for what was expected to the main demonstration.
US officials have ruled out any announcement during the three-day trip on whether the US will scrap steel tariffs, the issue dividing the Iraq war allies. Nor is any significant movement expected over the issue of British prisoners held at Guantanamo Bay.
Mr Bush has hurriedly dropped plans to meet the families of the British victims of the September 11 attacks, at the memorial garden outside the US Embassy in Grosvenor Square this afternoon.
This event would have been the longest time that Mr Bush was in public view and the closest that he would have got to wellwishers and demonstrators.
The official reason for the sudden change of heart was that Mr Bush wanted this emotional meeting with the families to take place away from the public glare. Private talks were now to be held inside the heavily fortified embassy. Mr Bush agreed to this change just before he boarded Air Force One to begin his journey yesterday.
