Sir Peter Kemp was a leading figure in driving the radical Next Steps reforms of the Civil Service in the late 20th century. Under Margaret Thatcher the senior officials were still overwhelmingly Oxbridge graduates, generalists and “lifers”. The outsider Kemp joined from the private sector, was an accountant and did not go to university. But the mandarins recognised his abilities and were quick to promote him.

Appointed as second permanent secretary and Next Steps project manager in the Cabinet Office in 1988, Kemp attracted much publicity as a reformer and as the opposite of a “Sir Humphrey”. But four years later his relationship with his minister, William Waldegrave, broke down. Forced to take premature retirement, he took his departure badly.

Edward Peter Kemp was born at Haslemere, Surrey, the eldest of three children. He attended Millfield School in Somerset (where he would later serve as a governor). His father left the family when Kemp was 10. His mother came from an eminent medical family, and his maternal grandfather, Sir Percy Sargent, served for a time as surgeon to Winston Churchill.

Partly because of straitened family circumstances, Kemp left Millfield and entered the Royal Naval College, Dartmouth. Here he excelled academically and relished the naval training; an interest in nautical matters and naval history remained with him throughout his life. A promising naval career was ended soon afterwards when a bout of rheumatic fever caused him to be invalided out of the Service.

He joined a company of chartered accountants as an articled clerk and spent some years working in British Guiana (now Guyana) and Paris. Shortly before his posting to there he married Enid van Popta in 1961. Returning to the United Kingdom in 1967 with a wife and two young children, he joined the Civil Service as a direct entry principal, not the route of the traditional mandarin.

At the Department of Transport he stood out because of his accountancy background, the only accountant in its finance department. The drive, individualism and “can-do” approach were already evident in the junior official. He led a team which explored the feasibility of the Channel Tunnel project; although aborted, it laid the groundwork for its later realisation. He then joined the Treasury in 1973, and by 1983 his abilities were recognised with promotion to deputy secretary. In this post he managed the annual pay negotiations, covering dozens of different grades, with the Civil Service unions.

Kemp’s later career and achievements were inseparable from the attempts by Thatcher and her ministers to reform management of and by the Civil Service. In 1979 the Prime Minister appointed Sir Derek Rayner as her adviser on efficiency. He was supported by a small unit housed in the Cabinet Office. An important part of Raynerism was the Financial Management Initiative (FMI) in 1982, designed to inform departments about the costs of their operations and to promote better management. The FMI, once established, was run mainly by the Treasury.

By 1987 the efficiency unit under Rayner’s successor, Sir Robin Ibbs, and its official head, Kate Jenkins, thought it time to examine the effects of Raynerism and what needed to be done to consolidate good management. After a service-wide survey, the unit’s Next Steps report suggested that financial and managerial responsibility could be devolved further down the line. This was readily accepted by Thatcher but not at first by the Treasury.

The report drew a distinction between policymaking (the work of senior civil servants who advised ministers) and those concerned with delivery of services (the great majority of staff who were engaged, for example, in providing benefits, running prisons, and issuing motor vehicle tax discs). It recommended that, where appropriate, the delivery of public services should be delegated to agencies under the control of chief executives. This devolution would accelerate the reforming, value-for-money and managerial trends which began with FMI.

On February 18, 1988, Thatcher announced the establishment of a new Office of the Minister for the Civil Service (OMC). Later she appointed Kemp, aged 53, as second permanent secretary and project manager of the Next Steps programme, or the creation of agencies.

Backed by a dedicated team of initially only three members, Kemp was an evangelist for reform. There was a feeling of excitement and comradeship among those setting up the first agencies. He visited permanent secretaries and cajoled them to suggest services suitable for agency status. Not all mandarins took kindly to his approach; some found him too direct and driven.

The programme gained momentum and headlines for Kemp. He wooed the press because he believed that being open would make sabotage of his agencies more difficult. But when John Major in 1992 created a new Office of Public Service headed by William Waldegrave as Chancellor of the Duchy of Lancaster, Kemp’s position became vulnerable. His relations with the minister were not good, and they disagreed over the contracting-out of services. A critical issue was whether the agencies were a step towards privatisation or a way of avoiding it by restructuring Whitehall.

Despite Kemp’s appeals for the two men to work together, Waldegrave was determined to have a replacement and eventually prevailed. The Cabinet Secretary, Sir Robin Butler, had the uncomfortable task of informing Kemp at the outset of his discussions that he could not provide any alternative post of equivalent seniority. Kemp took early retirement but felt humiliated.

Kemp’s departure excited much comment. Some regarded his downfall as the revenge of an old guard of mandarins, ill-disposed to reform, or as evidence of political pressure on impartial civil servants. Yet the spread of agencies continued under Kemp’s successor and today covers nearly 80 per cent of the service. Its survival owes much to Kemp’s painstaking groundwork and personal strength, and devising a set of protocols acceptable to the Treasury and to Parliament.

Kemp had brought a new perspective and different, even idiosyncratic, type of personality to the Whitehall machine — he was one of the first to talk of targets. Kate Jenkins, who worked for Kemp, considered him as one of the most successful modern permanent secretaries, driving through reform. Others, while accepting that he may have been a welcome irritant to the machine, complained that at times he was too impatient, even confrontational, with colleagues.

After his departure from the Civil Service Kemp returned to his earlier career as an accountant, working for a charity that promoted accountancy and financial expertise in former communist countries of Central and Eastern Europe. He also did the accounts for his local church. He served on the Audit Commission for six years, was a regular columnist on Civil Service matters and a frequent contributor to current affairs programmes on TV and radio.

Kemp expressed typically trenchant views on British government. He regarded the Civil Service reforms in the late 1990s as too timid, imposing the burden of change on the middle ranks rather than senior officials.

In his leisure time Kemp was a voracious reader and crossword fan. He is survived by his wife, three sons and a daughter.

Sir Peter Kemp, KCB, civil servant, was born on October 10, 1934. He died on June, 24, 2008, aged 73