The former Tory politician is being investigated by detectives leading Operation Fernbridge, which is investigating claims that political figures and others sexually abused boys at various locations in England.
There have already been two arrests: one, a former care-home boss, and the other a Roman Catholic priest.
Scotland Yard said last night that the charges related to seven victims aged between nine and 15, with the alleged offences dating back to the 1970s and 1980s. A third, unnamed man was interviewed but later released with no further action taken.
The Thatcher-era Cabinet minister is believed to be the highest-profile target of Operation Fernbridge detectives.
One source close to Operation Fernbridge said last night: "When it comes to who is involved, the police do not care how important or high profile they are - these people will not be getting away with it any longer."
Operation Fernbridge is a consequence of long-circulating rumours and claims by victims that senior members of the British establishment were involved in the organised sexual abuse of vulnerable children. Concerns gathered momentum when Labour MP Tom Watson - well known for revelations about the Murdoch press and phone hacking - suggested in the House of Commons that a powerful paedophile network may have operated in Britain, protected by its connections to Parliament and Downing Street.
Watson pointed to the 1992 prosecution of Peter Righton, a former consultant to the National Children's Bureau and lecturer at the National Institute for Social Work in London. Righton was convicted of importing child pornography. He was also a member of the now defunct Paedophile Information Exchange (PIE), which lobbied for the lowering of the age of consent.
Another former leading member of PIE was Sir Peter Hayman, a British diplomat later jailed. Hayman was alleged to be one of a number of high-profile visitors to a property now under investigation, as was the late Liberal MP Cyril Smith, who was unmasked as a paedophile after his death.
Speaking in the Commons, Watson told MPs: "The evidence file used to convict Righton, if it still exists, contains clear intelligence of a widespread paedophile ring ... The leads were not followed up, but if the files still exist, I want to ensure that the Metropolitan Police secure the evidence, re-examine it, and investigate clear intelligence suggesting a powerful paedophile network linked to Parliament and Number 10."
Watson decided to speak out after being contacted by a former child protection specialist with detailed knowledge of the Righton case. Prime Minister David Cameron responded saying Watson had raised a "very difficult and complex case". Details of the alleged crimes of the former Tory Cabinet minister are believed to have been passed to Watson in the wake of his comments in the House of Commons.
The claims came just a day after the home of Labour peer and former MP Lord Greville Janner was searched by police investigating allegations of historic child abuse. The search on Janner's home and Operation Fernbridge are, however, not connected. Janner was not arrested. Officers reportedly spent several days searching his home in Golders Green, London.
The father-of-three was accused of child abuse in a court case in 1991 but was not prosecuted. He received all-party support in the House of Commons when he described his ordeal and said there was "not a shred of truth" in the claims.
Last night, a source close to Operation Fernbridge said: "Police and MI5 knew about the allegations involving [the former Tory Cabinet minister] years ago. He's already been spoken to by police. I'd expect an arrest in the near future.
"If the arrest happens - and I trust it will - it means that there has been a massive cover-up for decades at the heart of British politics. An arrest would blow this apart. We're at a watershed moment. The public must know."
One of the alleged victims of the Thatcher-era Cabinet minister is believed to be so "damaged", however, that he would be unfit to take the stand in any criminal case.
A political source said last night: "It is thought there is lots of intelligence, but it is not yet high enough to reach the bar for an arrest to be made. There's lots of circumstantial evidence that needs further inquiry." The source added that he knew the former Cabinet minister is being investigated by the police, but could not confirm that an arrest was imminent.
A spokesman for the Metropolitan Police said no comment could be made on the likelihood of future arrests under Operation Fernbridge.