BUSINESS leaders last night delivered their own riposte to the Government after it rejected a plea for positive discrimination to bridge the North-South divide.

Deputy Prime Minister John Prescott rejected claims from MPs that the North-East's problems could be solved with extra public funding.

He also ruled out a review of the 25-year-old Barnett funding formula, saying that it was more important to ensure that the right policies were in place to boost regional competitiveness.

Rachel Spence, head of policy at the North-East Chamber of Commerce, said: "The Government wants the regions to operate more effectively which is fine if you are starting off from a level playing field but we are not.

"We will continue to lobby the decision makers for more funding and backing."

Steve Rankin, regional director of the CBI, said: "We do need more money for things like transport and skills and so on, but we also need more freedom to spend it in the way we want."

Mr Prescott was responding to a report by the housing, planning, local government and the regions committee earlier this year which warned that the North-South economic divide was growing.

The Government said that MPs were wrong to claim that transport cash was spent on tackling congestion in the overheated South, at the expense of boosting poor areas.

It also denied that there was a shortage of jobs in anything other than a "few particular communities" in the North-East.