Commons leader Jacob Rees-Mogg told Hull s Diana Johnson that schemes like the £3.6bn Towns Fund and £220m Community Renewal Fund were needed after "decades of socialist mismanagement".
City leaders in Hull, which is the fourth most deprived area in the country, are furious after being told they are not eligible for either of the two schemes created to 'level up' deprived areas.
It emerged after the Budget that Rishi Sunak's constituency of Richmondshire is one of 100 'priority places' allowed to bid for the Community Renewal Fund.
The Chancellor was already facing accusations of 'pork barrel politics' after it was revealed that his constituency was in the highest category for a separate scheme, the flagship £4.8bn Levelling Up Fund, ahead of areas like Sheffield and Barnsley.
Hull is also in the top category for this fund but faces a competitive submission process in which local MPs are encouraged to lobby on behalf of the proposals put forward by local councils.
It also failed to make the list of 101 areas chosen before the 2019 General Election to benefit from the Towns Fund. This week the first 45 areas found out how much they were getting, with Whitby, Grimsby and Scarborough among the areas to receive more than £20m each for regeneration schemes.
The Community Renewal Fund was designed to help communities before the arrival of the Shared Prosperity Fund, which replaces what previously came to the UK via its membership of the European Union.
Some £220m is being handed out in the coming year to "help support local areas to pilot imaginative new approaches and programmes that unleash their potential, instil pride, and prepare them to take full advantage of the UK Shared Prosperity Fund when it launches in 2022".
The prospectus for the fund says the Government has identified 100 "priority places for investment based on an index of economic resilience across Great Britain which measures productivity, household income, unemployment, skills and population density".
Though being on the priority list does not guarantee funding, each area will get £20,000 to help with their bid.
The prospectus says: "We are committed to transparency and a methodological note will be published, explaining how the index of economic resilience was developed and the 100 priority places identified."
Among the Yorkshire and the Humber areas on the list include Bradford, Scarborough, Wakefield and Rotherham, as well as Richmondshire in North Yorkshire.
But despite being ranked as the fourth most deprived local authority in the country, with a quarter of 18 to 25-year-olds unemployed, Hull is not on the list of 100 and so cannot bid for these funds.
Richmondshire is 256th on the list of most deprived local authority areas. But Stuart Parsons, a county councillor in Richmondshire and the leader of the North Yorkshire Independents group said he was glad "somebody has sat up and taken notice in central government about the situation in a very rural and deeply rural areas".
He said: "For years and years and years we have received no level of priority funding, whatsoever.
"We have suffered reduction in services, reduction in bus services, reduction in train services, accessibility is quite difficult around here and it's about time that somebody realised that the rural areas need a lot of assistance.
"We've historically suffered from the traditional Tory approach which is if the seats are safe we don't bother spending money there and then the Labour approach which was 'oh it's a safe Tory seat so we don't spend money there'.
"So, Richmondshire and Richmond Yorks as a constituency have suffered on the back of those assumptions.
"But we do have very real problems, we have a large population on the minimum wage or less, a large number of people who are on zero hour contracts.
"We have very flourishing food banks, which is a good indicator of how difficult the situation is.
"And we have a lot of people who potentially have not been working because of the fall in tourism and so on and hospitality and that's where the vast majority of people in this area get their work."
In Parliament today, Diana Johnson questioned Commons leader Jacob Rees-Mogg on why Hull was not in the 100 priority areas for the Community Renewal Fund.
She pointed out that of the 45 towns and cities to be told how much they were getting from the Government's £3.6bn Towns Fund, 40 have Conservative MPs.
Dame Diana added: "It seems with three Labour MPs Hull is excluded from even being considered."
She said: "So I'm sure that the leader of the house will want to avoid the impression of pork barrel politics, and the sleaze that led to his party's downfall in the 1990s.
"So can we please have a debate about the criteria for the allocation of these funds to maximise transparency."
Mr Rees-Mogg replied: "The reason we need this fund is because of the failings of socialism, socialist councils, socialist MPs, letting down their constituents, and this Government is putting things right, it is levelling up.
"Many of the areas that are receiving the money have still socialist councils, but in their wisdom they elected Conservative MPs, to get over decades of socialist mismanagement.
"And that's why the areas in most need now have Conservative MPs, and let's hope Hull has Conservative MPs too and then it'll be managed better."
Earlier today, the Prime Minister said the criteria used to determine which areas received town deal funding was "entirely objective".
"I think if you look at the map, one of the functions of the election is clearly that there are a lot of Conservative represented towns," Boris Johnson said on a visit to Teesport in Middlesbrough.
"I've asked about this and I'm told that the criteria was entirely objective - it takes in data on poverty, employment and so on.
"We want to unite and level-up across the whole country and want to do it in a completely impartial way, so that's what we are doing."
Mr Johnson pointed to freeports, new areas with different rules making it easier to trade, as an example of so-called "levelling-up". Both the Humber and Teesside have been chosen to host these new areas.
The PM added: "That is part of uniting and levelling up and if some places have missed out for now or feel they have missed out, then we will make sure we come back and think about the things they need and get on and do it."