SFO saved by cabinet revolt

The home secretary, Theresa May, has been forced by her cabinet colleagues to back down on her plans to break up the Serious Fraud Office, according to sources.

As I reported just over a week ago, Theresa May wanted to dismantle the SFO. A leaked paper passed to me disclosed that she wanted to put the lawyers who front the organisation into the Crown Prosecution Service and its investigators into the National Crime Agency (NCA) which is due to be set up in 2013.

She presented her proposals at last week's cabinet. According to a source, the discussion was "exceptionally difficult". He said there was almost no support for the break-up of the SFO.

Another source said: "The cabinet has agreed that the SFO model for tackling economic crime is the right one. The SFO will not be transferred into the NCA".

In an interview in today's FT, Theresa May came close to confirming that she has been thwarted by her colleagues. She said: "What we're doing in a number of areas is setting up the sort of arrangements that start to move us towards the NCA, the NCA structure and then review in due course what the appropriate relationship is with the SFO and the NCA".

There has been widespread concern that the battle against fraud and economic crime would be made less effective if the SFO's lawyers and investigators were separated into different institutions.

Although the SFO has had a somewhat chequered history since being created in 1988, it is widely believed that the prosecutor-led approach to tackling large and complex fraud, which the UK imported from the US, has proved more effective in recent years.

Transparency International, an anti-corruption lobby group, last week described plans to replace the SFO as "poorly conceived" and warned they could "reverse the UK's improving enforcement record".

Cafod, the overseas development agency of the Catholic Church, said: "it cannot make sense to weaken the fight against financial crime by absorbing fraud investigation in the National Crime Agency, where it will inevitably be treated as that Agency's lower priority".