It has eight ministers, 11,000 civil servants and a pounds 59m office - but what is it for?

PERCHED at the end of London's Victoria Street, the Department of Trade and Industry has had a pounds 59m refit. Its spacious new offices accommodate one member of the Cabinet - the President of the Board of Trade - and seven other ministers.

Yet the department, now headed by Ian Lang, lost out in the machinery- of-government changes which followed John Major's re-election as party leader. And Opposition politicians are beginning to regard the grand new DTI as Whitehall's white elephant.

The source of the controversy lies with the previous President of the Board of Trade, Michael Heseltine, who made competitiveness and deregulation the cornerstones of the department's policies. When, last month, he was made Deputy Prime Minister and First Secretary of State, he took responsibility for both policies with him.

Richard Caborn, Labour chairman of the Commons trade and industry select committee, said last week: "If the centre of industrial strategy was competition policy, and Mr Heseltine has taken the heart out of the department, what's left? That is not an unreasonable question."

The DTI's agenda highlights the uncertainty over its role in an era of privatised industry. The department has responsibility for energy policy and the sale of Nuclear Electric, the company running the nuclear power stations. Yet no legislation is necessary since powers were granted in the 1989 Act which sold off the electricity industry. The rumoured sale of the national grid is outside the department's competence since it is owned by the regional electricity companies which, of course, have been sold off.

Even the battle by other firms to take over three electricity companies has left ministers side-lined. Mr Lang will have to take the final decision, but that will be based on advice from the electricity regulator.

The DTI gained slightly from the abolition of the Department of Employment, but the most significant responsibilities - for example, for labour market statistics - went to the Department for Education.

The addition of science policy from the Cabinet Office angered the academic community which sees it as a downgrading. Responsibility for multi-media is shared with the Department of National Heritage. Supervisory powers wielded over the City are shared with the Treasury. And so the list goes on.

The wider question concerns the Government's commitment to intervention in industry. Mr Heseltine famously promised to intervene in British industry before every meal of the day. Yet he was hamstrung not only by his colleagues' ideological objections, but by the fact that the DTI has a budget of just pounds 1.97bn - a fraction of the Social Security budget. He failed to alter the traditional Whitehall power system under which the DTI plays second fiddle to the Treasury.

This debate goes back to 1979 when Sir Keith Joseph took over at the then Department of Industry with the aim of ending support for failing companies - "lame ducks". By 1983, Industry and Trade had merged. There then followed a succession of right-wing ministers whose tenure was brief: Cecil Parkinson, Norman Tebbit and Leon Brittan. Even Lord Young, whose famous "Department for Enterprise" seemed to have a larger marketing budget than most multi-nationals, was determined to bring the skills of the private sector to nationalised industry. It was, said one ex-MP, "intervention by advertising".

Nicholas Ridley went where Sir Keith had feared to tread, questioning the very existence of the department. As one ex-minister put it: "Nick believed that all the money spent on departmental schemes could be as well distributed by going to the top of the Victoria Street building and dropping it down on passing tourists. They would spend the money here and thereby boost the economy."

Under Peter Lilley, the monetarist approach alienated the business community, which felt its voice was being ignored in the recession. That changed during the Heseltine years, which saw several low-key but important reforms. Mr Heseltine streamlined regional assistance to companies through business links: one-stop shops of government advice.

He transformed the export drive. Under Mr Heseltine, exports became top priority and government became more active in ensuring, for example, that British companies do not compete against each other for overseas contracts.

In three years at the department, Richard Needham, the former Trade minister, travelled more than 300,000 miles in 40 overseas visits. His successor, Tony Nelson, is planning visits to the USA, Japan and India ahead of the largest ever trade delegation to South Africa.

Keith Hampson, a Conservative member of the trade and industry select committee and an ally of Mr Heseltine, believes the DTI has finally been converted to a limited form of interventionism and will enjoy "double clout" because the Deputy PM will back Mr Lang. He added: "The department has very clear functions which do require ministers with specific responsibilities. Labour would be screaming blue murder if, for example, there was no minister responsible for the City or energy policy."

That does not convince the Opposition. Brian Wilson, Labour's industry spokesman, said: "A new government department has been created to satisfy the vanity of Michael Heseltine. There is plenty for a proactive DTI to do, promoting manufacturing and trade. But, at the Scottish Office, Mr Lang elevated non-intervention into an art form".

Westminster is wondering what the nearly 11,000 DTI civil servants will find for their phalanx of ministers to do. One ex-official said: "It would be fair to speculate that some of those eight red ministerial boxes may be rather light."