Prescott's warning shot for Brown

John Prescott, Labour's deputy leader, yesterday sought to set limits on the power of Gordon Brown, the shadow Chancellor, in a future Labour government by delivering a pointed warning against his department becoming a "super Treasury".

In a move which will be widely interpreted in the party as a warning shot across the bows of a revamped Treasury under Mr Brown, Mr Prescott went out of his way to cast doubt on its capacity to carry out the enlarged role for it hinted at by the shadow Chancellor.

The resonance of Mr Prescott's decision publicly to revive a generation- old argument within the Labour Party over whether the Treasury should be the sole powerhouse of economic decision-making was increased by its timing.

It comes in the midst of shadow Cabinet soul-searching over the separate issue of whether to back proposals, promoted by Mr Brown and Tony Blair, the Labour leader, to withhold child benefit from parents of 16- to 18- year-olds still at school.

Chris Smith, the party's social security spokesman is locked in a further behind-the- scenes struggle over his attempt to extend payment of the new Job Seeker's Allowance to unemployed peoople from six months to 12.

Mr Brown is resisting the proposal on the grounds that it will cost an extra pounds 150m, and has had it deleted from the document Mr Smith will present to next weekend's National Policy Forum.

But Mr Prescott's speech yesterday looked well beyond such immediate issues to the role the Treasury will perform if Labour wins the election. It appeared to question a call by Mr Brown in Manchester last month for the Treasury to be "the ministry for the real economy" and "an engine for new ideas".

He welcomed Mr Brown's recent call for public debate on the "role and functions of the Treasury", but said: "I am less sure than some that the track record of the Treasury justifies widening its role to encompass larger economic and social renewal - of its becoming a so-called super Treasury."

Adding that the Treasury had a record of failure to "act on every occasion in the best interests of growth and investment", he said: "Too often in the past the dead hand of the Treasury has stifled initiative and innovation in the public and private sector with a rigid inflexibility on the interpretation of Treasury rules and the Private Finance Initiative."

Mr Brown's allies argued that he and Mr Prescott were at one in identifying the past failures of the Treasury and that Mr Brown envisaged a reformed Treasury acting "not as an obstacle to change but as a catalyst for change, working alongside all other departments".

But whereas Mr Brown suggested in Manchester that Labour had now rejected the failed Sixties model of a separate Department of Economic Affairs or that of a "powerhouse DTI", Mr Prescott appeared yesterday to be implying that the Treasury was not capable of the required reforms.

Labour backs Brown, page 7