Central government will reduce in size as more and more Whitehall functions are transferred to agencies and "practitioners", a leading Downing Street official predicts today.

In an article for ePolitix.com, Geoff Mulgan, the director of the Strategy Unit, calls for a "fundamental systems redesign" of the structure of government.

"The future shape of government is likely to involve a combination of vertical hierarchies, particularly for carrying out long-standing tasks with clear lines of management and accountability, and horizontal structures for determining strategy and carrying out shorter-term tasks," he says.

And he warns that the department-based system is often to blame for the failing and inefficiencies of government.

"The 'tubes' or 'silos' down which money flows from government to people and localities have come to be seen as part of the reason why government is bad at solving problems. Many issues have fitted imperfectly if at all into departmental slots," he said.

"Vertical organisation by its nature skews government efforts away from certain activities, such as prevention - since the benefits of preventive action often come to another department."

Whilst he does not back "big bang" reform, he predicts that an evolutionary approach will deliver fundamental change.

"Many of the problems that most concern government - competitiveness or crime - are inherently ill-suited to existing departmental structures," observes Mulgan.

To achieve better government, the Number 10 insider says more "vertical functions" should be "passed out to agencies, leaving behind slimmer, but more integrated central staffs".

Building on Gordon Brown's policy of Public Service Agreements, Mulgan envisages "more of the budget being tied to outcomes".

And he anticipates "more policy making being done in a cross-cutting way, but with the close involvement of practitioners".

"Longer term more radical options may also be feasible. Some have advocated that responsibility for whole systems - like the criminal justice system, transport or children's services could be organised in an integrated way, potentially with purchaser-provider splits, rather than, as at present, divided between many different agencies and professions each with their own budgets, structures and targets," he notes.