Pat Doherty, the vice-president of Sinn Fein and MP and MLA for West Tyrone, did not rule out disbandment when he said he believes all issues that remain to be resolved between unionists and republicans can be settled.

The DUP has refused to agree to the devolution of the justice and policing portfolios to Stormont ministers to the Government's planned timetable of May, saying the necessary confidence has not yet been built up and citing the disbandment of the Army Council as just such a confidence-building measure.

DUP chairman Lord Morrow said: "Undoubtedly if the Army Council stood down clearly and transparently we would welcome it – but we have no hint that it will happen."

Lord Morrow, an MLA, however, said that even the hint of such a move was to be welcomed.

But he said: "If it is going to be used as a trade, no way – and I ask the question 'What is the reason for the IRA still being there?'"

In an interview with the Guardian, Mr Doherty said devolution of policing and justice are crucial and suggested the Army Council could be disbanded as part of an overall settlement of the issue.

Questioned directly on whether disbandment is on the cards, he crucially did not rule it out.

He said: "That is essentially a question for the IRA, but I have no doubt, given all of the issues that we have resolved from the very beginning, all of the issues that you may have thought were insurmountable – both on the British side and on the unionist side and the republican side – that if we are serious about moving this whole process forward, and we are and the DUP are, then we can deal with any issue."

Devolution of the policing and justice powers to local Northern Ireland ministers is a huge but necessary step, said Mr Doherty.

"What the IRA would do would be up to them, but if you look at any of what were perceived as insurmountable issues some time back, all of them were resolved, so I have no doubt that issues can be resolved if there is dialogue and there is a clear intention as to where we intend to take the process."

He said there is no logic in the DUP saying there is not enough confidence to devolve policing and justice, and at the same time running a big economic conference in Belfast in May expressing confidence in the future to get US business to come in.

He said with the Rev Ian Paisley standing down as First Minister and DUP leader "they need a bit of time in the change-over of leadership to deal with their more contrary elements."

Mr Doherty was interviewed by the Guardian to respond to the revelation by Jonathan Powell, Tony Blair's former Downing Street Chief of Staff - in his new book being serialised by the Guardian this week - that the former premier offered to hold a secret, masked meeting with the IRA leadership as he fought to save the peace process from collapse.