Tony Blair this evening took the axe to John Prescott's sprawling Office of the Deputy Prime Minister in the most dramatic departmental change of his far-reaching reshuffle.

The ODPM, created in 2002 from the Department of Transport, Local Government and the Regions (DTLR), is to be renamed the Department for Communities and Local Government (DCLG) and placed in the hands of Ruth Kelly, who lost her job as Education Secretary.

Since 1997, Mr Prescott, 66, has run departments that have defied easy definition. In 2001, the DTLR was scrapped after the failure of Mr Prescott's ten-year plan for transport.

In its place, the ODPM, with a brief encompassing fire brigades, gypsies, social exclusion and the largest urban regeneration schemes in Europe, was assembled. Employing more than 6,000 staff with a budget of around £50 billion, the department's mission has been to create "Sustainable Communities", with a £38 billion plan to create more affordable housing across the country.

But the department, despite carefully articulating three "core values" of "Empowerment", "Equity" and "Value for money", has endured withering criticism in the last year, with many, even in Whitehall, uncertain as to its precise remit.

Last May, David Miliband was appointed minister for Local Government and Communities and asked to carry out a review of the ODPM and its responsibilites, a stock-taking that was followed by a damning secret report, obtained earlier this year by The Sunday Times, which asked senior civil servants across Whitehall about their understanding of the department.

"Not seen as a powerful central department... Unfocused and incoherent... How long will ODPM be around?... Not yet gelled as department... Bureaucratic, too much emphasis on corporate building... Confusing, interesting, uncertain," were all phrases used in a power-point presentation to Mr Prescott.

The report was followed by staff survey, details of which were released by a Commons Select Committee, which showed that one in ten employees of the ODPM had been bullied in the last year, with one in twelve describing discrimination under Mr Prescott's leadership.

The Commons Select Committee on the Office of the Deputy Prime Minister also criticised Mr Prescott of “an unjustifiable presentation of its achievements”, picking up on a claim in the department's annual report to have made "noticeable” progress towards efficiency savings of £620 million by 2007-08. The ODPM had managed to made just £150,000 in savings.

Today, the newly-formed DCLG described itself as "an expanded department with a powerful new remit" but those who will deal with Ms Kelly's new office welcomed the prospect of a slimmed-down successor to Mr Prescott's behemoth.

“Local government has always suffered from being part of a large department and not having its own secretary of state to speak up for it," said Dave Prentis, the general secretary of Unison, the trade union which coralled nearly a million local government workers into a strike earlier this year.

“At the moment, there is a feeling among local government workers that they are being sidelined, undermined and starved of the resources they need to provide world class services for our communities."

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