SCOTLAND YARD detectives believe they have amassed sufficient evidence for Jonathan Powell, the prime minister’s most senior aide, to be charged over an alleged cover-up in the cash for honours scandal.

Powell, Tony Blair’s chief of staff, is facing allegations that he conspired to pervert the course of justice, a serious offence punishable with jail.

The revelation - by well-placed Whitehall sources - is potentially disastrous for the prime minister given Powell’s central role in Blair’s administration.

Last Friday, the Metropolitan police completed its 13-month inquiry into the alleged sale of honours and sent its 216-page report to the Crown Prosecution Service (CPS).

It had previously been reported that police were pressing for charges to be brought against Lord Levy, Blair’s chief fundraiser, Ruth Turner, No 10’s director of government relations, and possibly Sir Christopher Evans, a biotech tycoon who lent Labour £1m.

The reports drew a furious reaction this weekend from senior Labour figures and the CPS, which claimed the police were trying to use the media to bring about charges. All those named deny any wrongdoing.

Well-placed sources, however, said Powell was in the frame over his role in a secret meeting held at Downing Street last summer to discuss the cash-for-honours investigation.

At the meeting it is alleged that Powell, Levy and Turner discussed how to “deal with” the police inquiry, which was rapidly gathering steam. Turner is then understood to have written a detailed note setting out an “action plan” which police have obtained.

Downing Street sources said Powell had spent the past few months trying to distance himself from the cash for honours investigation. The source said: “It’s fair to say that relations between Powell and Levy have cooled considerably. Powell has been doing everything possible to keep himself away from the inquiry, saying he hasn’t read certain documents and so on, but it seems the police may not have taken everything they were told at face value.”

The police investigation was launched after The Sunday Times revealed in March last year that several businessmen who were put forward for peerages had secretly loaned Labour millions of pounds.

During the investigation, detectives headed by Assistant Commissioner John Yates arrested four people and interviewed 136 suspects or wit-nesses including the prime minister. The inquiry was broadened earlier this year after the Scotland Yard team allegedly uncovered evidence of an attempt by key people at No 10 to subvert their investigation.

The police have said they are prepared to carry out further investigations and interviews should prosecutors recommend it. One source said there was “a long way to go yet”.

Lord Oakeshott, a Liberal Democrat Treasury spokesman who has followed the cash for honours scandal closely, said his letter recommending him for a peerage had been signed by Powell. “If Powell is charged, it goes right to the heart of the Blair government,” he said.

“The truth will come out in the witness box. Blair will have to appear as a witness in any trial and under cross-examination we will finally discover what really happened.”

Political attention is now turning to the prospect of an Old Bailey trial should the CPS press charges. A prosecution official said yesterday: “I don’t think they will spare his [Blair’s] blushes just because of who he is. If they think they need him to make the case, he will be called to the witness box.”

Over the past few weeks, No 10 is understood to have taken steps to reaffirm its relationship with Levy after reports earlier in the year that it had become frosty.

In the past month, Levy, the prime minister’s special envoy to the Middle East, has spent a fortnight holding talks with the Israelis and Palestinians.

Levy has not cooperated fully in police interviews and has declined to comment on many allegations put to him. However, with the prospect of charges looming, senior Downing Street figures fear that he may yet turn against his colleagues when defending himself.

He has previously made it clear that he was acting on behalf of the prime minister. Blair has publicly said he would take full responsibility for the actions of those involved in the cash-for-honours scandal.

Speculation is also mounting as to whether John McTernan, another senior Blair aide, is assisting police.

McTernan, No 10’s director of political relations who is now running Labour’s election campaign in Scotland, is understood to have been present at the alleged cover-up meeting in Downing Street last year.

This week Downing Street insiders insisted they had long been expecting the news. “The attitude here is one of que sera sera . This thing has rumbled on for a long time,” said one. “I don’t think our opinion of the way the police have handled things could get any lower.” Frank Field, a former Labour minister, said: “The police’s behaviour has been disgraceful. They are obviously so unconfident of getting charges to stick that they have leaked this idea that people should be charged before the whole farce is exposed.”

A source close to Evans, one of those allegedly facing charges, said: “Chris is absolutely spitting mad at the tactics over the past 24 hours. It appears to be part of an attempt by the police to force the CPS into a corner.”

A spokesman for the CPS yesterday made it clear that prosecutors would decide on charges. A statement issued by the CPS said: “We wish to make it plain once again that it is not the role of any agency to ‘recommend’ charges to the CPS.”

Any decision to go ahead with charges would have to be sanctioned by Lord Goldsmith, the attorney-general, whose role has attracted controversy because he is also a serving member of Blair’s cabinet.

Times Recommends

• Everyone will get vaccine against swine flu
• Artificial sperm and the race to build a baby
• BBC staff lavished with trips to lobby for awards