The Conservatives have called for a "fundamental overhaul" of the Department of Trade and Industry.

In the latest instalment of his efficiency review commissioned by the party, the corporate troubleshooter David James recommended a substantial reduction in the department's budget.

James proposed a saving of £750 million by reforming the department and removing 4,000 civil servants from the DTI headquarters.

His report said that a saving of £496 million could be made by reforming the DTI's business support programmes

Restructuring UK Trade & Investment as a focused British Export Promotion Agency and discontinuing the grants it pays to the RDAs would save £50 million, he added.

James also proposed a "keep or kill" review of all non-departmental public bodies - which amounted to 56 in 2003.

And the study called for an end to the enhanced early retirement scheme, resulting in a £13.7 million cost saving.

Shadow chancellor Oliver Letwin gave a warm welcome to the findings.

"The DTI is all too typical of the bloated bureaucracy Labour has created. Instead of helping business to flourish, it all too often stifles free enterprise," he said.

"These proposals will not only streamline the DTI, but will produce substantial savings for the taxpayer."

Trade spokesman Stephen O'Brien said the department's goals needed a significant overhaul.

"Under this completely reformed and refocused department, British business will be better supported, less burdened and free to get on with taking the risks and creating the jobs, reward, profit and investment upon which we all depend," he said.

Streamlining

The latest plans follow Liberal Democrat calls to scrap the DTI in its entirety.

Trade secretary Patricia Hewitt has already announced plans to streamline the work of her Victoria Street fiefdom in a bid to boost spending on British science.

Last month James set out proposals to secure £500 million in savings at the Department for Environment, Food and Rural Affairs.

In total his proposals could amount to total savings of £80 billion across Whitehall.

The study follows the recent Gershon review which recommended a £30 billion reduction in the cost of public administration.

Letwin is expected to study his findings before announcing a new Tory assault on the machinery of government.

But ministers say any further efficiency savings could jeopardise the delivery of core public services.

DTI cutbacks

Under the latest spending review, the department has secured a three per cent real terms increase in funding up to 2007/08.

The DTI also plans to reallocate annual efficiency savings of at least £380 million by 2008 to business priorities on innovation, enterprise and productivity.

Under the government's plans, policy and delivery structures will be streamlined. This will result in a total reduction in civil service posts by 2008 of 1,010 in core DTI functions.

A further 200 jobs will be axed in UK Trade and Investment - with 270 set to go in other bodies.

Regional Development Agencies will take over responsibility for some current DTI functions - securing an increase in funding from £234 million to £483 million by 2007/08.

But industry minister Jacqui Smith defended her department in the face of James' criticism.

"The fact is if the DTI did not exist we would have to invent it," she said.

"Moving Whitehall deckchairs might have some superficial appeal but under these proposals many UK businesses would lose out.

"The CBI and other business leaders have repeatedly confirmed their desire for an effective DTI that promotes British business while also regulating sensibly."

And Liberal Democrat trade and industry spokesman Malcolm Bruce said the Conservative plans amounted to "hot air".

"The biggest piece of deregulation that can be done to help business is to cut government interference and scrap the DTI altogether," he said.

"Cutting the number of civil servants while leaving the basic apparatus of the DTI in place will do nothing to address the huge costs of government interference to taxpayers and businesses."