No-one is expected to face charges after the 16-month-long cash-for-honours investigation into Labour Party funding.

The Crown Prosecution Service is set to announce its decision today but reports last night insisted that no charges would be brought against any of Tony Blair's inner circle.

While Mr Blair and his close allies will feel vindicated by the decision, his detractors are bound to raise questions. Angus MacNeil, the SNP MP for Na h-Eileanan an Iar, expressed disbelief when he heard last night.

The inquiry, in which 136 people were interviewed, cost the taxpayer £1m.

Now the police will come under political pressure to explain why they took so long to reach their decision. Neither Scotland Yard nor Downing Street would make any comment last night.

Mr Blair has never believed charges would be brought and railed privately at the investigation which he believed unfairly besmirched his reputation.

The main focus of the investigation was on Lord Levy, Mr Blair's fundraiser, Ruth Tur- ner, the former director of government relations at Downing Street, and Sir Christopher Evans, the biotech tycoon.

All three, who protested their innocence, had been arrested during the course of the inquiry. Mr Blair was interviewed - as a witness and not a suspect - three times by the police, the last time only a week before he left office.

The original complaint by Mr MacNeil and two others was brought under the Honours (Prvention of Abuses) Act of 1925, after it merged the Labour Party had accepted loans from supporters who were later nominated for peerages.

Some months ago speculation suggested no charges could be made under the original complaint so police had switched the focus to conspiracy to pervert the course of justice. At all times Downing Street maintained it was co-operating fully with the police.

Last night Dennis McShane, a former Labour minister, said: "This was always a politically instigated investigation, launched by the Scottish National Party, and Scotland Yard should have been much more cautious in doing the dirty work of the Scottish Nationalists, who have had endlessly publicity in the last 18 months.

"It is a tragedy for Scotland Yard that they allowed themselves to be dragged into a wholly politically motivated and entirely malicious investigation."

Mr MacNeil said he hoped any decision taken by the CPS was not based on politics, but on evidence. "It is remarkable that there has been 16 months of investigation, 6300 documents given from Scotland Yard to the CPS. Throughout the time period the Yard liaised with the CPS and obviously they both together sustained the investigation and now we have to believe that the CPS believe it was all a wild goose chase."

Last night Sir Menzies Campbell, the leader of the LibDems, argued that if there was no question of criminal charges, there still remained many questions of political responsibility.

"This whole affair has diminished politics and politicians in the eyes of the public. Never again must there be any question of any link between preferment and financial support."

John McTernan, director of political operations at No 10, helped draw up the honours names and was questioned twice by police but denied any wrongdoing.

Last night he said: "It is a huge relief, for me personally and for my colleagues. This has been going on for a long time.

"Myself and others, particularly Ruth Turner, have been subject to quite a high degree of not just public scrutiny but public speculation. There was no cover-up because there was nothing to cover up. I always made it clear I would be vindicated. In the event, it looks as though we have been.

"The inquiry is over. The CPS has decided there should be no charges. That vindicates the position that I have maintained personally. There was nothing we did that was wrong."

However, SNP MP Pete Wishart told BBC Newsnight Scotland: "It is quite a remarkable decision. This is an investigation that has gone on for 16 months. I am absolutely amazed and astounded that the CPS decided no prosecutions are now to proceed.

"We have to be satisfied that no political strings have been pulled whatsoever in order for these proceedings not to proceed. What we have to know is why the CPS decided not to prosecute. I believe this has got a long way to go." A spokeswoman for Lord Levy said that the peer would not make any comment until after the results of the official inquiry are announced tomorrow.

If the CPS confirms the decision today, accusations and counter-accusations will fly. Some of Mr Blair's allies have been straining to get off the leash for months, to condemn what they believed was a malicious smear campaign.

Their contempt will not rest with Mr MacNeil and his colleagues, but will extend to some of Gordon Brown's closest, and most senior allies in the Labour Party, who they believe used the inquiry to hasten Mr Blair's departure.