Tony Blair's leading civil servant admitted yesterday that public services were not "significantly different" despite Labour spending billions on attempts to improve them.
The remarks from the Cabinet Secretary, Sir Andrew Turnbull, followed Gordon Brown's pre-Budget report which revealed the Government is now spending £12bn a year on an army of regulators, inspectors and policymakers - as much as the combined running costs of four Whitehall departments and over 4 per cent of the total amount that is spent on public and private sector support.
In a further blow, the National Audit Office declared that poor financial management in Whitehall is threatening to undermine efforts to improve the NHS, schools and public transport.
The Tories seized on all three developments as proof that Labour's massive increase in spending is failing to deliver a commensurate improvement in key services.
Dr Liam Fox, the Tory party chairman, said: "The Government's obsession with targets serves nobody's interests but their own. Perhaps now they can start to put patients, pupils and passengers first.
"Gordon Brown keeps raising taxes but then wastes the money. The public want more services, not bureaucrats."
Mr Turnbull also admitted the Government is planning to scrap hundreds of its public sector performance targets in favour of a handful of core aims for each department. He acknowledged that Labour's reliance on league tables and targets had flooded public sector workers with unwanted paperwork and created a reliance on figures that were vulnerable to distortion.
Peter Gershon, the head of the Office of Government Commerce, confirmed that he is to lead a study of red tape in an attempt to release billions for re-investment. Mr Gershon told the Financial Times that the Chancellor has made future spending conditional on real efficiency savings.
In a separate report, the NAO revealed that only a minority of official bodies are correctly using new accounting methods designed to ensure funds go where they are most needed. NAO inspectors calculate that a 1 per cent improvement in the handling of the £421bn spent by 46 organisations each year could put almost £5bn more into front-line services.