Tory turmoil over regional agencies

He said the Conservatives must "clarify" whether they will abolish the agencies – which each spend hundreds of millions of pounds in an attempt to boost regional economies – and has told colleagues they must have a clear alternative if they are scrapped.

Last night Labour seized on his comments to claim the Tories are "all over the place", with some MPs having insisted the agencies would be abolished and others saying they would merely be scaled down.

"We're trying to add some detail to the policies," Mr Clarke said at Westminster yesterday.

He added: "The only document we put out is not clear. We are intending to finalise. I, at times, have been quite open in my scepticism of whether RDAs have any real role.

"Their existing role has been allowed to grow too big and is a very expensive way of delivering an awful lot of complex arrangements and it isn't very accountable. Having said that they all do some good things.

"I'm minded to say we should get rid of them, but actually I'm one of those insisting we go through it with colleagues and just decide if we are going to get rid of them, how are we best going to have this presence out of London – this regional, local presence – which delivers things most effectively."

The agencies were set up by John Prescott in a drive to tackle the north-south divide but critics question their effectiveness and condemn a lack of accountability.

The Government claims Yorkshire Forward pulls in 4.50 of investment for every 1 spent, but opponents say there is no evidence that investment could not have been attracted anyway.

Yorkshire Forward is one of the more popular agencies, credited with leading the fight to save jobs after the merger of HBOS with Lloyds TSB and taking a leading role in ambitious plans to trial carbon capture technology. But even Tory council leaders in the region are split over whether it should remain.

Nationally, the Tories are agreed on stripping some powers from the agencies and giving them to councils, but opinions within the party are split on whether to abolish them altogether or simply scale them back and leave them to deal with economic development.

In 2008, former Shadow Communities Secretary Eric Pickles had appeared to spell the end for them, likening his plans to restructure quangos to a "restructuring" of Anne Boleyn, but days later Mr Clarke's predecessor Alan Duncan insisted RDAs "will remain but with a business-led enterprise purpose".

After replacing Mr Pickles, Caroline Spelman said last February the agencies would be "abolished" – although councils will be able to choose to keep them running if they have local support – but before Christmas she said they would "evolve into Local Enterprise Partnerships".

Yesterday, Mr Clarke said there had to be some "level of government" in place below the national level.

"We will look at the functions, and we will then finally decide if there is any case for continuing with regional development agencies," he said. "I don't meet many people who are fixated with saying that office block and that big administrative budget is the central part of all of this.

Last week Mr Clarke's opposite number Lord Mandelson said the Tories "would be kicking in the teeth every region of the country that needs the sort of effective planning, speed of decision making, use of resources and joining up of government that the RDAs bring" if they did abolish them.

Last night Business Minister Pat McFadden said: "First it was tax, now it's RDAs. Every time a Tory policy is exposed to scrutiny the result is chaos."