TWO Cabinet ministers are at war over controversial plans to strip the region of key powers to revive the economy and secure jobs.

Business Secretary Vince Cable told MPs he would listen to pleas for crucial responsibilities - over business support, inward investment and key sector development - not to be transferred back to London.

Asked if a new ‘local economic partnership’ (LEP) could enjoy “similar powers” to the doomed One NorthEast development agency, the Liberal Democrat replied: “Yes, we would be sympathetic to that approach.”

Yet, just three weeks ago, Eric Pickles, the Conservative Communities Secretary, insisted all the above powers would be handed to Whitehall, as he fast-tracked the shake-up.

Meanwhile, in further evidence of government disarray, a White Paper on regional development - promised within weeks - has been delayed until later in the year.

Mr Cable has been widely criticised for allowing the combative Mr Pickles to seize control of axeing the RDAs - even though responsibility officially lies with his department.

The North-East Chamber of Commerce (NECC), which boasts more than 4,000 members, has led calls for a rethink of the decision to strip the region of key functions.

Yesterday, Mr Cable launched a fightback, in his first appearance before the Commons business select committee, when he faced fierce criticism from Labour MPs from the North and the Midlands.

The Business Secretary agreed further analysis was required of the likely impact of giving UKTI, a Whitehall quango, responsibility for all business support in the regions.

Almost 60 per cent of UKTI-led investment is made in London and the South-East - with just 14 per cent going to the three northern regions, Mr Cable was told.

Rachel Reeves, the Leeds West MP, said: “Where UKTI are involved, investment comes to London and the South-East. If you are bringing back powers to London, that’s bad news for the regions.”

Mr Cable admitted she had “a good point”. And he added: “We are not being rigid or prescriptive. If a case is made for doing certain things through local enterprise partnerships, then we will listen to that.”

But the Business Secretary insisted it was right for venture capital funds to be allocated centrally - rather than by a body in the regions - because of “high overheads”.

Mr Cable also defended the decision to scrap RDAs, telling MPs: “The country has become more unequal. The central mission that RDAs had has not been successful.”

And he denied any clash with Mr Pickles, adding: “We are giving the same message. We are very clear that RDAs are to be abolished. I use more neutral language, but there’s no difference on the central point.”

The Business Committee has launched an inquiry into the proposed role and funding of LEPs, which are meant to replace RDAs from April 2012.

The Northern Echo revealed, last week, that the government’s freeze on financial assistance in the interim threatens nearly 1,800 jobs at 35 firms that One NorthEast has been ordered not to help.

Yesterday, former union chief Jack Dromey, now the MP for Birmingham Erdington, warned Mr Cable that RDAs were in danger of “effectively collapsing”.