Alistair Darling is poised to announce plans for “sharia bonds” in his first budget next month.

The bonds - the first to be considered by a western government - would enable the government to attract investment from wealthy Middle Eastern businesses.

Ministers have been exploring whether or not the plans are feasible since early last year. Ed Balls, the schools secretary and a close ally of the prime minister, said: “The Islamic finance market is growing globally year on year, and we want London to play a key role in this area. We will do everything we can to promote new ways for British Muslims to bank, save and borrow.”

If introduced, the bonds, known as sukuk, would comply with Islamic law, which forbids making a profit on money lent. Instead, bondholders would receive “rent” on leasing government assets such as buildings. At the end of the bond term the Treasury would buy back the asset, releasing payments to the investor.

Most Islamic financial products work on the principle of investing in a fixed asset able to generate a rate of return, such as property that yields rent, or an asset that can repay a larger capital sum on redemption.

Critics said the scheme would waste money and could undermine Britain’s legal and financial systems.

Edward Leigh MP, the chairman of the influential public accounts committee, said: “I am concerned about the signal this would send - it could be the thin end of the wedge. British common law must be supreme and should apply to everyone.”

The government is due to close its consultation on the issue this week and is keen to stress that the move may secure London’s position as the world’s financial centre.

A Treasury spokesman said: “This will be complicated to enact into British law, but we have taken advice from experts in the field, which suggests it is feasible. It is vital that the UK continues to offer a platform for all successful businesses.”

The government consultation comes in the wake of comments made by Rowan Williams, the Archbishop of Canterbury, who suggested that the introduction of elements of sharia in the UK was “inevitable”.

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