THE wealth of the North-East could be half that of the rest of Britain's by 2020 if current trends continue, an influential think tank has said.

According to the Institute for Public Policy Research (IPPR), the North-South divide is growing, with prosperity concentrating in the ''winner's circle'' of the South-East.

The IPPR is close to New Labour and its comments come in evidence submitted to a House of Commons inquiry on inequalities in the UK.

A report said three regions lag behind: ''Northern Ireland, Wales and, the poorest of all, the North-East of England.

''On current trends, by 2020, Gross Domestic Product per head of population in the North-East could be half of the UK average.''

The IPPR called for action from the Government to tackle the problem, in particular by spending more on research and development in the region.

Dr Ashok Kumar, Labour MP for Middlesbrough South and East Cleveland, called for a fresh look at how England's regions are funded from Whitehall.

He said: ''We are modernising all other aspects of Government, it is time we looked at modernising how money is allocated to the regions.''

He described the IPPR as a well-respected body and said its findings ought to be taken seriously.

He said: ''If its facts are correct, then I think alarm bells should be sounding in Government. This is very worrying indeed.''

Many of the other submissions to the Commons' Urban Affairs Committee are also critical of Government policy.

The North-East Assembly, set up as an unelected forum for business and councils to discuss the region's problems, wants £1bn extra a year from London to match the amount spent in Scotland.