THE Government will today announce plans to pump millions of pounds of investment into blighted North-East towns and cities.

Deputy Prime Minister John Prescott is to unveil proposals which could breathe new life into run-down urban areas across Teesside, County Durham and Tyneside.

The moves, to be contained in the long-awaited Urban White Paper, come only 24 hours after Trade Secretary Stephen Byers effectively admitted the continued existence of the North-South divide.

The North Tyneside MP spoke of how unemployment in the North-East had fallen by 26 per cent since Labour came to power, compared to a near 50 per cent drop in the South-East.

One in five North-East people of working age had no qualifications compared to about one in ten in the South-East.

And ten times as much was spent on research and development by manufacturing business in the South compared to Mr Byers' home region, the Trade Secretary admitted.

His comments came as the latest figures showed North-East unemployment at nine per cent, slightly down on last month, but still the highest in the UK and more than twice the South-East level.

The North East Chamber of Commerce's head of policy, Rachel Spence, said: "Unemployment levels in the region have remained fairly static for around eight months, while nationally the figure has fallen slightly.

"Obviously this is a further indicator of the widening North-South economic divide which the Government at last appears to be acknowledging."

Mr Byers' frank assessment of the North-South gap came after months in which Tony Blair appeared to play down the division, claiming differences within regions were as big as between them.

But the Trade Secretary warned yesterday: "The economic differences between UK regions are clear and indicate that a winners' circle is emerging, with some regions keeping up and staying in touch, while others slip further behind."

He called for a "new regional policy which not only tackles historic regional disparities" but responded to the needs of a modern economy.

And in a clear sign that ministers are co-ordinating their bid to revive the English regions, Mr Prescott is to unveil plans to regenerate huge areas of run-down North-East land and, in the words of Labour sources, potentially "pump millions" into the region's cities.

The Northern Echo understands that today's Urban White Paper will propose to:

l Let councils set higher business rates in specific areas to fund special local improvements if businesses are consulted;

l Offer tax breaks to companies to develop contaminated areas;

l Create up to 12 new "urban regeneration companies" to co-ordinate urban revival, backed by a £100m fund;

l Remove VAT from the renovation of houses empty for ten or more years;

The action plan was last week underpinned by Chancellor Gordon Brown's pledge of tax measures worth £1bn over five years to help fund the regeneration programme.

Mr Prescott's blueprint is designed to tackle the population exodus from run-down cities and face up to crime, poor schools and traffic growth.

Bishop Auckland MP Derek Foster last night said he and other North-East Labour MPs were finally "winning the argument" over the need to target special help to the region.

Mr Foster signalled there would be no let-up in pressure on the Government, including the need to reform the Barnett funding formula which benefits Scotland and discriminates against the North-East.

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