A few spanners short of a Prime Ministerial toolkit

The Cabinet Secretary is conducting a crucial review. He's asking if Tony Blair has enough power

FOR two decades the most intelligible element in the Tory political project has been to "roll back the state". We, too, said Labour, have done with Big Government. So here they are in power with a highly favourable fiscal position, and further curbs on spending promised by the Chancellor. As a result the size of government is shrinking daily. But what is the endgame? Just what, in terms of its size and dimensions, does the New Labour state look like?

In Germany and in France, government remains big. Come left, come right public spending remains half national product. In Japan and the United States government stays small. It may have to grow in Japan (for who else is going to look after all those little old Japanese ladies in their eighties) but both those societies seem historically to have fixed government at between a quarter and a third the size of the economy.

Then there is Britain. The Tories tried and tried but only briefly succeeded in pushing the ratio below 40 per cent (that was in the Lawson boom). Under Major, government grew back to the size it was when Jim Callaghan greeted the removers outside Number 10.

But thanks to Kenneth Clarke's flanker, Gordon Brown now sits on a ratio dipping down to 38 per cent. If, as the headlines say, he keeps the clamps on till 2001 (and there is a mild downturn rather than a recession during the intervening years) it will fall further.

Does Labour then believe, as the Tories used to, that smaller government is good because it allows the substitution of individual for collective choice, which in turn expands freedom - or at least one American-oriented version of it?

That kind of question, of course, rarely gets asked by practising politicians, beset as they are by concrete questions about preventing, say, a virulent outbreak of waiting-list disease. But stopping a long way short of the big question - how big ought government to be - New Labour seems remarkably ill-equpped to answer even intermediate questions about how much public spending is enough. The reason is to be found in the axis on which the Blair government turns, between Treasury and Number 10.

We journalists love stories about disharmony between Prime Minister and Chancellor. Yet far more important than personal relations is the large and growing disparity between their capacity to do their respective jobs. Tony Blair is a weak prime minister. That may sound outrageous, given his personal and party standing. And yet, measure him against his Chancellor in terms of his wherewithal to think strategically while monitoring the progress of Labour policies and the effectiveness of its spending decisions.

Policy unit, strategic presentation unit, Alistair Campbell, Minister without Portfolio ... all have proven relatively ineffectual in providing Mr Blair with a grasp of both big picture and daily decision-making.

Zip up your anoraks and consider, for a moment, the machinery under the Blair administration's hood. How do the Treasury's "comprehensive spending reviews" - into the purposes of departmental outlays - mesh with the scores of "qualitative" policy reviews and initiatives set up by individual ministers and the Prime Minister himself.

Case in point, housing for those on lower incomes. Housing Benefit review is the Treasury's baby. But housing support helps explain social exclusion and, by all accounts, Tony Blair is taking an abiding personal interest in the work of the Social Exclusion Unit, which is based in the Cabinet Office. There exists no mechanism for bringing them together - apart from rather clumsy Cabinet committees which, since Tony Blair cannot chair them all, are as likely to perpetuate problems of coordination and conflict as resolve them.

In January the Prime Minister did something he should have done last May. He asked the Cabinet Secretary (the newly appointed Sir Richard Wilson) to conduct a thoroughgoing appraisal of the tools of the prime ministerial trade - the set of levers in Number 10 and the Cabinet Office meant to secure coordination, prioritisation, monitoring and delivery on the promises with which Labour came to power.

Sir Richard has been listening and thinking hard, and is due to report to the Prime Minister (coincidentally) around Budget Day. There is a case for a radical overhaul of the whole lot and a proper "prime minister's department" is now a possibility. Even if the PM had not commissioned this review, the new Cabinet Secretary would probably have had to do something with the loose baggy monster that is the Cabinet Office, embracing intelligence, civil service management, and a rash of units - for example by bringing it administratively closer to the PM's under-staffed offices next door.

Hard men will straightaway say: offices, machinery are secondary. Politics is all about personality - if Peter Mandelson or the Prime Minister's chief of staff, Jonathan Powell, had been more effective, questions about co-ordination and priorities would not have arisen.

But machinery does matter, as Gordon Brown proves. The Treasury opines about spending and the entire shape of the Blair Government is altered. Perhaps, even if Blair were administratively stronger, outcomes would not be much different. But at least we would have a sense of considered government strategy.

Whitehall, like nature, abhors a vacuum. In Sir Richard Wilson's hands lies - to put it grandiloquently - the Prime Minister's fate. If the occupant of Number 10 lacks the capacity to govern by deciding spending priorities and quantities, the clever and well-supported tenant of the house next door in Downing Street certainly does not.