Plan to 'split up Treasury' revealed

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The Guardian newspaper claims that the scheme was developed by Tony Blair's then adviser Lord Birt in order to consolidate power over Whitehall at Number 10 at a time of difficult relations with Chancellor Gordon Brown.

The paper quoted unnamed insiders as saying that Mr Brown could have been offered the job of Foreign Secretary as his Treasury fiefdom was divided between a smaller and less powerful Ministry of Finance and a Department of Economic and Industrial Policy, taking in the functions of the Department for Trade and Industry.

Downing Street played down the significance of the report, which comes on the eve of Mr Blair's expected announcement that he is stepping down as Labour leader, paving the way for Mr Brown to succeed him as Prime Minister.

A spokeswoman said only: "This is referring to something that is alleged to have been discussed two years ago and that never happened, and therefore bears no relevance today."

According to The Guardian, Lord Birt's proposals, in a 200-page document drawn up with the then head of the No 10 Strategy Unit David Halpern and senior Blair aide Gareth Davies, were known only to a few members of the Prime Minister's inner circle, including chief of staff Jonathan Powell, election co-ordinator Alan Milburn and long-time ally Peter Mandelson.

The paper does not make clear the extent of Mr Blair's personal involvement in discussing or considering the proposals.

It quotes an unnamed individual involved in the plans as saying that they were designed to ensure No 10 took a clear lead in implementing policy.

"We had a tension with different decisions being taken on the same subjects in totally different places in Whitehall," the anonymous individual is quoted as saying.

"Neither the Treasury or the No 10 Strategy Unit or the Cabinet Office could implement policy by themselves, nor could they do it together, so individual departments could divide and rule. The plans in part were designed to deal with this problem."