Kenneth Clarke, the Home Secretary, said in a Commons statement that the 'unit fine' scheme - relating fines to seriousness of offence and ability to pay - and restrictions on the weight given to offenders' records when they are sentenced will go.
Until recently Mr Clarke was still defending the principles behind the 1991 Criminal Justice Act, while casting serious doubts on how they had been implemented. However, yesterday he plumped for outright abolition of key aspects, seven months after the Act came into force.
After John Patten's school test concessions on Tuesday, it was the second government about-turn of the week - albeit one delivered in Mr Clarke's inimitable style. 'Lie down in a dark room,' he told Robert Maclennan, the Liberal Democrat home affairs spokesman, who angrily criticised the changes.
Yesterday's Cabinet agreed to put law and order at the centre of a programme of 15-20 Bills for the next parliamentary session to rebuild Tory support after last week's bad county council and Newbury election results.
It will include an education Bill to speed up teacher training, a Bill to aid deregulation across Whitehall, and privatisation of British Coal.
The courts' former powers to take full account of defendants' criminal records will be restored under provisions making clear, Mr Clarke said, that sentencers have 'all reasonable discretion', bearing in mind the seriousness of the offence, the circumstances of the offender and his or her offending behaviour.
The Home Secretary told MPs that he had considered whether the widely criticised unit fine scheme could be modified, but added: 'We have now concluded that it is not possible to do so.' Instead, magistrates will be required to consider 'fully' an offenders' means, without resorting to mathematical formulae. The change is expected to bring a flood of appeals.
Courts will be given the power to increase sentences for those who offend on bail.
The Government will also fulfil its undertaking of last July to double the maximum sentence for causing death by dangerous or drunken driving from five to 10 years.
The Act was aimed at ensuring jails were not filled with petty, though persistent, offenders - and that fines rated on a scale according to their gravity had a similar impact on people of differing incomes.
However, judges complained that ill-drafted and confusing provisions - preventing the imposition of a harsher sentence simply because of an offenders' record, while allowing 'the circumstances' of past convictions to be studied - left little to discretion.
Mr Clarke said the changes would allow 'courts to exercise judgement and commonsense' and enable justice to be done 'in the interest of the public, the victim and the offender'.
Defenders of the unit fine system blame much of its bad publicity on the high level of disposable income that could be taken into account, and defendants' failure to fill out means forms, which meant the maximum penalty had to be imposed.
In the notorious case of a man fined pounds 1,200 for dropping a crisp packet, the penalty was cut to pounds 48 once he had completed the forms.
Mr Clarke's statement was welcomed by the Magistrates' Association and the Association of Chief Police Officers. There were warnings yesterday, however, that Mr Clarke had thrown the baby out with the bathwater by abolishing the provisions instead of amending them.
Mr Clarke's stance is understood to be at least partly based on confidence that sentencers will not abuse their newly restored powers. But Stephen Shaw, director of the Prison Reform Trust, said there was 'every likelihood that we will see an increase in the prison population made up of petty offenders'.
Tony Blair, shadow Home Secretary, said Mr Clarke's plans would leave a 'dreadful hole' in an Act aimed at tackling arbitrary and inconsistent sentencing.
The quickest post-legislative U-turn yet seen will be tacked on to the current Criminal Justice Bill, which deals with financial crimes, enabling it to be enacted by the summer.
That will ease pressure next session on a range of other Home Office measures involving the police, juvenile offenders, New Age travellers and Sunday trading.
The determination to seize back the initiative will be underlined today by the Prime Minister, who addresses Scottish Tories on 'fighting back'.
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