Ministers were at loggerheads with Buckingham Palace last night over who had the responsibility to strip "non-dom" peers of their titles.
Anger was growing yesterday that four peers who have given up their seats in the House of Lords to enable them to live abroad for tax reasons will still be able to style themselves Lord or Baroness and use their coats of arms.
More than 20 MPs are next week expected to back moves to close the loophole and remove the titles from Barons Bagri, Laidlaw and McAlpine and from Baroness Dunn.
A fifth peer, Lord Foster, is still using his title although he is no longer a British resident and lives in Switzerland with his family.
A ministerial source acknowledged that the peers' position, highlighted yesterday by The Independent, had been discussed by the Government. "We're aware of this – it's a tricky constitutional issue," the source said. "But the view at present is that there is not much we can do about it."
The Government does not plan legislation to remove the titles. A senior source said: "We are not going to legislate over the position of five people – it is not a priority." The source suggested that the only mechanism to take titles away without legislation was for the Queen to intervene.
The interpretation was rebuffed by Buckingham Palace. A spokesman told The Independent: "The Queen always acts constitutionally. Therefore any matter regarding the removal of titles – or knighthoods or any other honour bestowed by the Queen on the advice of her government – is a matter for government."
John Mann, a Labour MP who campaigned for the Commons expenses system to be cleaned up, hit out at ministers for trying to shift responsibility to the Queen. He said: "It is obviously a question for the Government and not for Buckingham Palace."
He said he would be contacting the Commons clerks on Monday to discuss the wording of a backbench Bill that would remove the five peers' titles. Mr Mann predicted that he would be able to win the support of at least 20 other MPs and appealed for the Government to find time for his Bill to be debated.
"It is a matter of principle. These people are choosing to live in another country, to pay taxes in another country. Therefore they should forfeit the right to hold a title. This situation devalues the currency of the honours system."
Demands for a crackdown on the peers were receiving growing support last night.
Tom Brake, the MP who co-chairs the Liberal Democrat justice policy committee, called on them to renounce their titles voluntarily.
"This situation is pretty outrageous in my view. These five should do the decent thing and refrain from using these titles," he said.
Pam Giddy, director of the Power 2010 political reform campaign group, said: "This shows yet again the need to reform the upper chamber.
"The myth that appointed peers bring an independence and range of expertise we all benefit from is once again shown to be nothing more than window dressing for a process that allows our political leaders to reward those that have 'paid their dues' to the parties."
The issue of where peers live was brought to a head by the Constitutional Reform and Governance Act, which came into effect this week. It required that members of the House of Lords are British residents, paying full UK tax on all their earnings.
Three Conservative peers – Lord Bagri, Lord Laidlaw of Rothiemay and Lord McAlpine – decided to give up their seats in the Lords to hold on to their non-dom tax status. The crossbencher Baroness Dunn decided to leave the House for the same reason.
The architect Lord Foster of Thames Bank also announced he was giving up his seat ahead of the deadline. Last night, in a letter to The Independent, he said he was not a "non-dom" and had left the Lords not for tax reasons, but because he was no longer a British resident and lived in Switzerland. "I did not go there for tax purposes, I went there because it has become my home. My family is there and my children attend local schools. I pay both UK taxes and Swiss taxes."