Accusing ministers of arrogant abuse of power, of being too long in office, and of failing to take responsibility for their actions, Mr Smith said sweeping changes were needed to give Parliament stronger powers over the executive.
He also advocated devolution, freedom of information and a Bill of Rights to provide 'checks and balances against the arbitrary use of power', while a civil service 'becoming confused about its role and unclear as to its obligations' after 14 years of rule by the same party needed a new code clarifying its relations with ministers.
A 'new constitution for a new century' had to be fashioned, Mr Smith said.
The recent 'abuses' of government power - seen over pit closures, Matrix Churchill, the 'Treasury legal aid' paid to the Chancellor, the trawl of Home Office files to see if Bill Clinton had applied for British citizenship, and repeated ministerial refusal to resign or take responsibility for their actions - had exposed not just arrogance but 'serious systemic weaknesses' in British government, he said.
'I have not known a time when there was such genuine disquiet throughout the country about the standards, practice and attitudes of government,' Mr Smith told a meeting of the Labour Finance and Industry Group in London.
John Major's rejection as 'uncharacteristically cheap' of his challenge over Norman Lamont's 'Treasury legal aid' showed how out of touch he was with the public mood when people were 'truly outraged by such a disgraceful use of public money'.
A Chancellor whose 'entire economic strategy has been blow to pieces' clung on to office, Mr Smith said, as did Michael Heseltine, despite his humiliating reverse over the pit closures and the High Court finding that he had acted illegally.
Comparing that with Lord Carrington's resignation as Foreign Secretary over the Falklands, Mr Smith asked: 'What on earth does it take for a minister to resign from this government?'
'They mislead Parliament, they break the law, they jettison policies which once formed the cornerstone of their entire programme, they use public money to pay private legal bills, they are forced into retreat by the anger of the British people - and nobody takes responsibility.'
The Matrix Churchill trial, he said, had exposed ministers 'sliding about, running for cover, giving false answers, ducking their duty to Parliament and behaving in an altogether shabby way' while the behaviour of officials had been 'equally questionable'. They were shown 'blithely discussing how best to circumvent official guidelines and protect their ministers if their misdeeds became public'.
Mr Smith declared himself a genuine admirer of the civil service. But the truth was that their impartiality was being compromised and the fact that senior civil servants could see no impropriety in the payment they made to Mr Lamont was 'itself revealing'.
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