John Reid, the Home Secretary, is running a secret internal Whitehall review of counter-terrorism measures in parallel with a separate Treasury investigation by Gordon Brown.
Fresh anti-terror legislation is set to be promised in the Queen's Speech today, which will also include new action on immigration, organised crime and antisocial behaviour.
The disclosure of the Home Secretary's review will intensify speculation of tensions with the Chancellor over the direction of policy on combating terrorism. Whitehall insiders disclosed that the so-called Reid group is undertaking "blue-skies" thinking, including examining the case for a security council to tackle terrorism, a minister for security and a department for security.
By contrast, Mr Brown has rejected calls for Britain to follow the US in appointing a cabinet minister for internal security, although he is creating a unified intelligence budget to cover MI5, MI6 and GCHQ.
The Reid group meets on Thursdays and is chaired by the Home Secretary. It includes the Foreign Secretary, Margaret Beckett, the Defence Secretary, Des Browne, Hilary Benn, the Secretary of State for International Development, and the heads of MI5, MI6 and GCHQ.
A Whitehall source said: "The anti-terrorism strategy has been condemned as not fit for purpose. Mr Reid is determined to rush forward now before another incident. His review is operating in parallel with Brown, but the two are not passing intelligence to each other."
Patrick Mercer, the Conservative homeland security spokesman, said: "This is personal politics gone mad."
A Downing Street report leaked last year criticised the counter-terrorism strategy, codenamed Project Contest, warning of "little effective co-ordination" across Whitehall.
The Queen's Speech will contain more than 20 Bills, with Mr Reid responsible for many of the most high-profile measures.
The counter-terrorism plans are likely to include tougher "control orders" for terrorist suspects and proposals to make it easier to deport foreign suspects.
The Home Secretary set out a proposal yesterday which will give police the power to shut down "places which are the bane of a community" - such as brothels - within 48 hours.
It will be included in a Bill tackling antisocial behaviour, which will also give police the authority to turn people away from designated areas, such as town centres, and introduce fines for the parents of persistently unruly children.
The Queen's Speech will contain fresh Home Office initiatives on immigration and sentencing, reform of the probation service and curbs on organised crime.
A government source said: "We will show that the Tories are on the wrong side of the argument on a lot of issues, and don't understand people's concerns."
The Conservatives will retort that Mr Blair is a lame-duck Prime Minister who will be unable to turn many of his promised Bills into law before he relinquishes power, expected to be in the next nine months.
Other flagship measures will include a Pensions Bill, which will restore the link between the basic state pension and earnings after 2012 and raise the state pension age to 68 by 2044, as well as a Climate Change Bill.
The Government is expected to promise:
* Counter-terrorism measures, including tougher rules on "control orders" and on deporting foreign terrorist suspects.
* Action against employers who hire illegal immigrants and the establishment of an independent committee to advise on "optimum" migration levels.
* A shake-up of the probation service, opening it to competition from the private and voluntary sectors.
* A White Paper paving the way to abolition of the Child Support Agency.
* Tighter restrictions on the release of offenders; more say for crime victims.
* Powers to impose "super Asbos" on drug dealers and fraudsters, limiting their travel and finances.
* Action to combat climate change, with five-yearly targets for reducing carbon dioxide emissions.
* An overhaul of the pensions system, including the linking of the state pension to earnings by 2012.
* Controls on rogue estate agents, forcing them to pay compensation to homeowners badly advised.
* Giving enhanced powers to the Mayor of London and the London Assembly.
* Freeing the Office for National Statistics from political interference, enabling it to report directly to Parliament.