The Institute for Public Policy Research, a think tank close to Downing Street, is recommending that the Treasury's powers should be reduced as part of a Whitehall shake-up in Labour's second term.

A paper to be submitted to Tony Blair today calls for a strengthened Cabinet Office to take over many of the Treasury's functions.

The report also calls for a royal commission into the civil service, MAFF to be abolished and for the Lords Chancellor's Department to become a ministry of justice.