The Tory grandee told an online event that the approach taken by the current government was failing "to fire up and enthuse the strengths and opportunities of our economy across the country".
Lord Heseltine was converted to the cause of regional devolution in 1981 when he was appointed “Minister for Merseyside” by Margaret Thatcher in the wake of the Toxteth riots.
And asked about the current willingness for central government to hand over powers and resources to metro mayors outside London, he said: "I'm extremely sad because it's quite obvious to me that the momentum has gone out of the devolution agenda."
As evidence of this he cited the Government's response to his recent written question about when the much-delayed devolution and local recovery White Paper, setting out Ministers' vision for this area, would finally be published.
He told the event organised by the Centre for Progressive Policy think-tank: "Here we are, the crisis of Covid, the crisis of Brexit and all they can tell us is that in due course, they will bring forward a White Paper."
He also asked which powers had been given to existing metro mayors to bring them up to the level of Greater Manchester's Andy Burnham, after this was promised by the Conservatives in 2019.
The ministerial response pointed to the new devolution deals in West Yorkshire and the Sheffield City Region but did not mention any extra powers being given to other mayoral authorities.
Lord Heseltine said: "[Prime Minister] David Cameron, [Chancellor] George Osborne and [Business Secretary] Greg Clark pursued this agenda in the most imaginative way really since the Mayor of London was created under Tony Blair.
"There was a real shift and the promises I'd hoped for Boris Johnson, who as London mayor did rather a good job, would have pushed for this.
"But all the indications coming out of Whitehall and now these parliamentary offices make it quite clear that we're back in the old rut where central government works out schemes, devises plans and makes offers to very wide ranging local authorities, many of them too small to be able to cope with the problems they've got.
"But it's a Civil Service designed, ministerial-determined Whitehall impost, and that really completely misses the point of devolution, which is to fire up and enthuse the strengths and opportunities of our economy across the country.
"Well, if ever there was a moment, Brexit has been hidden behind COVID. The government I think is doing a commendable job in coping with COVID. The figures are going the right way and the vaccine is the only real solution to this horrendous threat. But underneath and behind that is Brexit. And by any standards, the economy has to change.
"With the new post Brexit world, you have to mobilize every strength you can find, and eradicate every weakness. And the idea that Whiteall understands what these are in Manchester Liverpool, Tees Valley, Bristol, Cambridge is just unrealistic."
Lord Heseltine said devolving powers to metro mayors meant they were forced to put party politics aside to make progress. He said Ministers needed to embrace the idea "or it will become their enemy".