Blair give himself a 41 per cent pay rise

Tony Blair's salary is to rise by 41 per cent to £163,000 and cabinet ministers will get an 18 per cent increase to £118,000, Downing Street announced last night.

The bumper pay rises, coming just days after Labour's crushing general election victory, are bound to provoke contoversy and fresh allegations of government "arrogance".

However, the increases were recommended by the Senior Salaries Review Body (SSRB) before the election in order to give cabinet ministers a comparable rate with the private sector.

Since 1997, their pay rises have been limited to inflation on the orders of the Chancellor, Gordon Brown, in order to avoid criticism, but Mr Blair has faced a growing rebellion from cabinet colleagues, led by his deputy, John Prescott, who argued they were being denied "the rate for the job".

Since 1997, Mr Blair has not drawn the full salary to which he is entitled. But now he will take the full amount, so his pay will rise from £116,339 to £163,418 a year.

Meanwhile, cabinet ministers will see their salary rise from £99,793 to £117,979. They pay of Cabinet members in the House of Lords will go up from £74,911 to £88,562 a year, also a rise of 18 per cent.

A Downing Street spokesman said: "The SSRB said in February this year that the fact that senior ministers were not taking their full entitlement was distorting the ministerial pay system, and recommended that they should. They now will."

The pay hike was disclosed as Mr Blair announced a sweeping shake-up of his the junior and middle ranks of his Government, promoting several Blairites and appointing more women.

But Mr Blair faced further allegations of "cronyism" by appointing Sally Morgan, his political secretary, as a Minister of State at the Cabinet Office. He had to ask the Queen to make her a life peer because she is not an MP.

Ms Morgan, a former Labour Party official, appears to have lost out in a power struggle with Anji Hunter, a long-time friend of Mr Blair who is now his special assistant. She will be promoted to a new post as head of government relations, including liaison with ministers and the Labour Party. Ms Morgan's post as political secretary will go to Robert Hill, a member of the Downing Street Policy Unit responsible for health.

Mr Blair's spokesman said that appointing someone from his "close inner circle", showed the importance he gave to forming a strong team at the Cabinet Office under Mr Prescott, which will aim to drive up standards in public services.

In the reshuffle, Peter Hain was promoted from Energy Minister to become Minister for Europe, regarded as the most important ministerial post outside the Cabinet.