The Queen rides into a storm of controversy and conspiracy

Five years of meticulous efforts to rebuild the reputation of the Royal Family were left in ruins yesterday by the unanswered questions about the collapse of the trial of Princess Diana's former butler, Paul Burrell.

Politicians were openly voicing their suspicions that the Queen's belated recollection of a private audience with Mr Burrell had been used to prevent evidence emerging in court about the private lives of the royals.

Police officers described themselves as "bewildered" by the case's collapse. They said anyone searching for an explanation should examine the behaviour of the Court rather than the investigating officers.

The collapse could make Mr Burrell a very rich man. There were reports yesterday that newspapers were prepared to bid as much as £1m for his version of events, with expressions of interest coming in from around the globe.

Privately, ministers braced themselves for the possibility that the Queen's role in the affair could lead to questions in Parliament as the Government prepares for the Queen's Speech, whose centrepiece is to be ambitious reforms of the criminal justice system.

Downing Street denied rumours that Tony Blair had intervened to stop the trial. A spokesman confirmed that the Prime Minister was informed on Monday "as a matter of courtesy" that the Queen had remembered being told by Mr Burrell five years ago that he had taken some of Princess Diana's possessions for safekeeping.

The Attorney General, Lord Goldsmith, was brought in to advise the prosecution in his role as senior law officer.

Mr Burrell was acquitted of stealing 310 items belonging to the late Princess, when the trial, estimated to have cost £1.5m, was halted. Downing Street insisted the decision to call off the trial was made by the prosecution alone.

One Cabinet minister tried to play down the affair's significance, saying privately that it was simply a 75-year-old woman being forgetful.

But another senior figure in the Government, who has had more frequent contact with the monarch, described her as "astute" and suggested she timed her intervention to ensure that Mr Burrell was not called to the witness stand. He said: "It was a clever move and the right thing to do. They are weird people in a weird world. The last thing they want is a damaging attack on the nitty-gritty of their personal lives.

"But there are all sorts of implications for the constitutional situation. Given that the criminal justice system is going to figure heavily in the Queen's Speech it will call into question the role of the monarchy in legal situations."

A senior figure in the Metropolitan Police said: "There is bewilderment among officers. We are going to pick over the case but the core reason it collapsed is a long way removed from the role of the police. There was no indication this alleged conversation was a strong part of the defence. It's the Royal Family who drew attention to it at a very late stage."

Glen Smyth, chairman of the Metropolitan Police Federation, said that Mr Burrell was "a very lucky man".

"Burrell does not even appear to have told his defence about this conversation with the Queen," he said. "If we had known about this then we would never have prosecuted him on theft charges."

The former Labour MP Tony Benn said: "The impression I have is that he was going to say things about what Princess Diana thought of the Prince of Wales."

Mr Burrell's solicitor, Andrew Shaw, dismissed conspiracy theories as "rubbish".