Uther sees the way Arthur looks at his manservant. It's the same way he used to look at Igraine. But unlike Arthur, he sees the way his manservant looks back at him – that love in their eyes is mutual although they've only just seemed to realise it. Uther knows he should tell Arthur that it can't be, that he should give up; he needs to find an appropriate woman to be his queen and give him an heir. But he can't deny his son of love. Uther has missed out on it for what seems like a lifetime, and he can't make himself take that away from him.
Although no one believes it, Arthur's happiness is more important to Uther than the whole kingdom. If he gets that happiness from Merlin, then Uther will continue to turn a blind eye. Igraine would want Arthur to be happy, too. Igraine; his source of light in the darkness, the light that's now gone out. He won't let Arthur's light go out though, no matter what.