CONSERVATIVE plans to axe regional development agencies are in trouble today after a committee of MPs warned businesses will suffer if they disappear.

The MPs' report highlights the "achievements" of the quangos set up to attract investment and jobs and the "broad and strong consensus" that they are badly-needed.

The verdict is a major blow to the Tories, who have pledged to repeal the 1998 Act that created One NorthEast and Yorkshire Forward and hand their powers over economic development to local councils.

To add to the embarrassment, the Business Committee which carried out the inquiry is led by Conservative MP Peter Luff, a close ally of party leader David Cameron.

However, today's report does back business leaders who have criticised the "mission creep" which has piled unnecessary new responsibilities - such as for urban design, sport and languages - onto the RDAs.

And it warns of confusion ahead when a Bill before parliament requires RDAs to share responsibility for development with little-known Local Authority Leaders' Boards (LALBs).

The report comes at a critical moment for the RDAs, little more than one year before a general election that the Conservatives are expected to win.

Under the Tory proposals, groups of local authorities would be allowed to continue co-operation on business development, but the key powers - over housing, planning and economic strategy - would be lost But, after watching the work of RDAs, the MPs concluded: "We were impressed by the achievements of these projects, as well as the positive comments made by a range of business people about the impact of the development agencies.

"The committee notes the broad and strong consensus about the need for a level of governance between central government and local authorities and is satisfied that RDAs serve a useful function."

In evidence to the inquiry, the British Chambers of Commerce (BCC), the Confederation of British Industry (CBI) and the Engineering Employers Federation (EEF) all called for a return to the RDAs "core" task.

The MPs agree today, warning they must be "business-led" and adding: "We are concerned about the tendency of governments to add responsibilities to RDAs that may distract them from their core tasks."

The looming abolition of the unelected regional assemblies means the RDAs will - in partnership with local authority leaders - be charged with drawing up a single economic strategy for their regions.

But the Business Committee warned greater clarity was needed before the Local Democracy Bill, currently in the Lords, reaches the House of Commons.

It said: "If business-led RDAs are to have a greater role in regional strategy, the government needs to be clearer about how local democratic interests will be protected."

The overall budget for the RDAs is £2.2m this year, including the allocations for One NorthEast (£248m) and Yorkshire Forward (£303m).