Gordon Brown is planning a mini reshuffle this week amid growing signs that Baroness Scotland will be forced to resign over the affair involving her employment of an illegal immigrant.
The Prime Minister backed the Attorney General last week after it emerged she had employed Tongan cleaner Loloahi Tapui, 27, for six months when she had overstayed her student visa by five years.
But in a sign that time was running out for Lady Scotland (pictured below), it emerged yesterday that Mr Brown is to carry out a mini reshuffle within days – with "contingency plans" drawn up for her resignation.
In a separate move, Margaret Hodge, the Blairite MP for Barking, is expected to return to her old job of Arts minister after leaving a year ago on compassionate grounds.
The Prime Minister is to freshen up his Government as the Tories make new claims that he secretly plans to claw back £15bn extra in income tax if Labour wins the general election.
In a fresh attempt to discredit the Prime Minister's plans for hauling the UK out of recession, shadow Chancellor George Osborne produced further leaked Treasury documents that suggest taxpayers will pay a heavier price than previously thought. The Tories said the "unexplained" 32.5 per cent rise in tax receipts was not backed by predictions of economic growth over the period – and amounted to 3p on the rate of income tax.
The documents, marked Confidential, show that Labour has factored in an £14.8bn increase in proceeds from income tax over the next four years. By 2011-12, the Treasury predicts it will take in £161.5bn in income tax, an increase of 11.6 per cent and, according to the Tories, "nowhere near what is possible in economic growth". The tax take will rise to £178bn, then £192bn in the following two years. Income tax receipts are projected to rise steadily as a proportion of the nation's gross domestic product, from 9.9 per cent next year, to 11 per cent in 2013-14.
The Treasury figures also reveal that by 2013-14, the cost of the UK's debt interest is predicted to be £63.7bn, equivalent to £2,144 – or £41 per week – for every taxpayer. "Labour's secret spending plans, which Gordon Brown never wanted to make public, appear to reveal an income tax bombshell," Mr Osborne said.
The revelations about the Government's crisis plan to cover the cost of the recession emerged as Mr Brown's proposals for swingeing cuts in services have been placed under scrutiny. Hours after the Prime Minister finally admitted to the TUC last week that cuts were required, the Tories produced leaked documents suggesting the Government had been planning to cut departmental budgets by 9.3 per cent.
But an Independent on Sunday investigation has cast fresh doubt on the Government's ability to carry out spending cuts. Five years after the Government pledged to slash more than 100,000 civil service jobs following an efficiency review by Sir Peter Gershon, the total workforce and overall spending on Whitehall departments have actually increased. An analysis of 17 of the 21 departments shows that the payroll has risen from 525,000 to almost 540,000 since 2004. The staffing numbers conflict dramatically with the official government figures, which put the civil servant headcount at about 496,000.
David Craig and Matthew Elliott, whose new book Fleeced! traces some £3trn of public funds they believe has been mismanaged in the past decade, claim the Cabinet Office cut 958 jobs in three years by "embroidering the truth". The department transferred hundreds of staff in different branches to berths elsewhere in Government.
A Treasury spokesman attempted to play down the Tory tax figures, insisting they did not give any new information. The increase was based on projected economic growth and increased tax rakes from measures already announced, he added.
The reshuffle will tidy up "loose ends" left over from the cabinet shake-up in June after the resignation of several ministers, led by James Purnell.
Downing Street said last week that Mr Brown had "full confidence" in Lady Scotland, the most senior law officer in Britain. But, although she denies any wrongdoing, her position looked untenable when it emerged that, under laws passed when she was a Home Office minister, anyone found guilty of employing an illegal immigrant faces a fine of up to £10,000. Her deputy, Vera Baird is tipped to succeed her.
Mrs Hodge left her post a year ago to care for her husband Sir Henry, who died of leukaemia in June. Barbara Follett will move from Arts to a vacancy at Communities and Local Government left by Sarah McCarthy-Fry who replaced Kitty Ussher as Exchequer Secretary. Ms Ussher resigned over expenses.