Despite being part of a Government that has increased the overall public sector payroll by over 800,000 since 1997, Mr MacShane said tax cuts could be financed by cutting spending.

He said that he did not know of a single minister who privately “does not despair at the waste of money on pointless projects, publications, or legions of press officers that add no value”.

Mr MacShane said it was bizarre that UK aid to India totalled £1billion when that country has more billionaires and millionaires than the UK. In another swipe at waste, he complained: “Can I be the only MP outraged that town clerks – even dressed up with fancy titles such as chief executive – can now get paid £200,000-plus for running rubbish collection services in small towns?”

He noted David Cameron’s Tories have yet to commit to a radical bid to slim down Britain’s bloated public sector.
He said: “Labour should not be frightened of being a party that leaves more money in the pockets of hard-working individuals, starting with those at the lower end of the income scale.

“A Labour government that got serious about weaning its bureaucracy and clients off dependency on the citizen’s money would find itself popular again.” Mark Wallace, Campaign Director of the TaxPayers’ Alliance, said: “Denis MacShane is right to say the Government should spend less and tax less, though it’s a shame he didn’t insist on that policy when he was a minister.

“If someone like Denis MacShane is willing to argue for tax cuts it’s a sign of how ­radically times are changing.”
Another senior Labour figure also laid into the party’s sense of purposelessness yesterday.

Phil Collins – an ex-speechwriter to Tony Blair and who now works for possible leadership candidate James Purnell – said Labour had become addicted to big Government.

The party, he added, had a future that “looked bleak” and it really needed to become less authoritarian.