Senior officials from Buckingham Palace and St James’s Palace have held talks “through the usual channels” about legal authorities setting up their own hearing. But Tony Blair and Lord Goldsmith, QC, the AttorneyGeneral, have ruled out such a move.

In an interview with The Times Sir Michael Peat, who will head the internal palace inquiry on behalf of the Prince of Wales, expressed his frustration at the relentless criticism of the palace’s decision not to stage an independent inquiry headed by an outsider.

Sir Michael, one of the Queen’s most senior advisers for nine years until he became Private Secretary to Prince Charles in September, said that he felt as if he was being “cut to pieces in no man’s land”.

There is anger at St James’s Palace over the role of Scotland Yard, which assured Prince Charles at Highgrove last year that there was compelling evidence that Mr Burrell had been selling possessions owned by Diana, Princess of Wales. Scotland Yard never provided the evidence to the trial and has not set up an inquiry of its own. Sir Michael said of the trial’s subsequent collapse: “The Royal Household was only a bit player, but we seem to have been found guilty until proved innocent.”

Sir Michael, who confirmed that the palace would publish a joint report with Edmund Lawson, QC, refused to criticise the government response.

“The Prince of Wales’s office cannot conduct in isolation an inquiry into the termination of the Burrell trial,” he said. “We are not in a position to order an external inquiry into this matter.”

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