The Foreign Office is divided on the issue. One proposal under consideration is for a quicker than expected shift to democracy, within six months of the fall of President Saddam. An elected provisional government would draw up a new constitution.

But the prevailing mood in the Foreign Office is for the maintenance of stability through a US-British military administration, with a gradual shift to democracy.

The foreign secretary, Jack Straw, said yesterday he had spent the morning in discussion at the Foreign Office on options for "the day after" President Saddam goes but refused to reveal the proposals under review. He said an announcement would be made in due course.

The discussion of regime change continues the government shift towards a war footing. In further signs, Mr Straw described the Iraq crisis as being in its "final decisive phase" and indicated that the case could soon be "overwhelming" for tabling a second resolution to the UN security council to authorise war. The resolution could come next week.

Mr Straw, denying that discussion about regime change meant a decision on war had effectively been taken, described the discussion as "prudent" planning. Regime change, at least officially, is not a British government aim.

The debate has produced unlikely bedfellows. Some British liberal ministers and diplomats favour a speedy move to democracy, even though this leaves them in alliance with Pentagon hawks who argue that democracy could encourage its spread to other parts of the Middle East.

A British minister said: "There is considerable traffic in both directions: we are in Washington, and they are here."

But the Foreign Office preference is the same as that of the state department, which is to have the military running the country to maintain stability and create new institutions, with a gradual shift to democracy.

Mr Straw said the aim was to maintain the territorial integrity of Iraq.

The Foreign Office and state department fear is that with a sudden shift to democracy the Shia Muslim majority would replace the Sunni Muslim minority, creating pressure for the formation of an autonomous Shia state in the south. President Saddam is a Sunni and surrounds himself mainly with Sunnis, with only a few token Shia Muslims.

The state department favours the replacement of President Saddam with another Sunni leader.

The Saudi regime, which finds any talk of democracy threatening, is campaigning heavily for the Sunni option.