Treasury officials confirmed that the Chancellor would decide whether to help fund the Government’s public-spending programme by borrowing funds via Islamic law-compliant bonds, known as sukuk, within the next few weeks.

Britain is set to become the first Western nation to issue bonds approved by Muslim clerics in line with sharia, which outlaws conventional loans involving interest payments for being “sinful”.

But the move could see the ownership of public buildings and other assets switched into the hands of wealthy Muslim businesses and individuals, many based in the Middle East.

The radical proposal was originally put forward by Gordon Brown’s ally Ed Balls last year as a method of making more financial products available to British Muslims – and opening the burgeoning Islamic financial market to the UK.

Islamic law forbids making money from interest, making conventional loans unacceptable to the devout.

Islamic bonds avoid breaching Sharia law’s restrictions on the payment or receipt of interest by providing a predetermined income from specified assets, such as leases on land, known as the profit rate. Sukuk is now estimated to be worth £5.5bn in a £125bn global Islamic financial market.

A consultation exercise designed to test reaction to the scheme was launched in November, and will end on Thursday.

A Treasury spokesman said that a feasibility study has been looking at whether or not the bonds would be practical. MPs are expected to be updated on progress in the Budget.

Edward Leigh, the Conservative chairman of the House of Commons Public Accounts Committee, raised concern over the plans.

He told The Mail on Sunday: “I am concerned about the signal this would send: it could be the thin end of the wedge.

“British Common Law must be supreme and should apply to everyone.