The north-south economic divide in England is getting worse not better, MPs say.
Six regions are lagging behind the UK average, which is having a damaging effect on growth in Britain as a whole.
The ODPM: Housing, Planning, Local Government and the Regions committee said it was concerned not enough was being done to redress the balance between these areas - North East, North West, Yorkshire and Humberside, East and West Midlands and the South West - and the rest of England.
The MPs questioned Deputy Prime Minister John Prescott's policy of "levelling up" - an attempt to make every region more prosperous rather than redistributing wealth.
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Tax penalties and tax breaks should be used to encourage major employers away from London and the South East
Andrew Bennett MP, chairman of the ODPM committee, said: "Relying on endless growth in the South East would do little to help people in Middlesbrough or Penzance."
Some of the worst poverty, joblessness and bad health are concentrated in a few areas of the country.
The government has set itself targets for stimulating growth generally while reducing the gap between the rich and poor areas by 2012.
The government simply seems to be expecting those at the back
to catch up with the best
The MPs said they are worried the right initiatives and money are not in place to achieve this.
between the economies of the English regions have continued to widen in recent
years resulting in higher unemployment and shorter life expectancy in the North
and escalating house prices and congestion in the South East," said Mr Bennett.
"I am very pleased that the government has set a Public Service Agreement target to narrow this gap.
"Unfortunately, government does not yet know how its target is to be
"It is promoting bodies like regional development agencies and
regional assemblies but they will only scratch the surface."
The report also challenged the Barnett Formula which was designed in the 1970s to redistribute wealth around the regions, Scotland, Wales and Northern Ireland.
"Firstly, most people don't understand it," said Mr Bennett.
"Secondly, if you look at the resources which are allocated to Scotland and the North East of England, the North East does very badly and there is no justification for that."
"The formula has no rationale now. We need to find a fairer way of allocating resources."
The government has said it will decide on a direction on policies by July 2004.
Mr Bennett called for a closer examination of investment in science, research and
development, transport, defence, culture and sport in poorer areas.
"At the moment, the government simply seems to be expecting those at the back
to catch up with the best, whilst encouraging the best to grow faster," he
The Office of the Deputy Prime Minister said the government acknowledged there were "persistent disparities" in the regions' economic development.
"Output per person in the North East is nearly 40% or £7,000 below that of
"The government believes that real economic gain must come from 'levelling
up' - enabling every part of the country to develop and grow to its full
potential, rather than simply re-distributing existing economic activity."