A network of specialised centres is necessary to tackle the "allergy epidemic" in the UK, an influential House of Lords committee has recommended.
The peers also said pregnant women should be allowed to eat peanuts as current Government advice to avoid the food was not only failing to prevent peanut allergy but "may even be counterproductive".
The committee recommended an overhaul of food labelling regulations to improve on "vague and defensive" information such as "may contain nuts".
The Science and Technology Committee's report said allergies cost the NHS in England £1 billion a year for medication and treatment.
The committee also heard that the cost to the UK economy of asthma is £2.3 billion a year.
Crossbencher Baroness Finlay of Llandaff, who chaired the sub-committee which produced the report, said there had been a rapid growth in the amount of people suffering from allergies.
She said: "This phenomenon is not unique to the United Kingdom. Many developed countries in the Western world have seen a rapid increase in the prevalence of allergic disorders in the last half century, coupled with an increasing severity and complexity of these diseases."
Baroness Finlay said the cause of the increase was probably down to a "multitude of genetic and environmental factors" and called for increased funding for research into the epidemic.
The Baroness said the committee was "extremely alarmed" about Department of Health guidance given to pregnant mothers to avoid peanuts.
In parts of the developing world where ground nuts were used in a "soup" for weaning youngsters there had not been the explosion in the number of people allergic to peanuts, she said.
Baroness Finlay told reporters: "Academics and clinicians have told us that a growing body of evidence has suggested this guidance may not only be failing to prevent peanut allergy, but might possibly even be counterproductive.
"Considering the severity of suffering from a peanut allergy, we recommend that this advice is withdrawn immediately pending a full review of the current evidence."
The Baroness said the committee heard "time and time again ... that there are simply not enough allergy specialists in the UK to treat those most at need".
The committee proposed creating new allergy centres in every Strategic Health Authorities, headed by an allergy expert but bringing together medics from other specialties.
These would act as a "centre of expertise", diagnosing and treating patients and helping educate and train GPs and nurses.
The committee urged health regulator Nice (National Institute for Health and Clinical Excellence) to carry out a review of immunotherapy as a long-term treatment for allergies.
One witness told the committee the UK was "the laughing stock of Europe" for failing to use immunotherapy, where people with allergies are exposed to small doses of the substance which causes a reaction in order to "desensitise" them.
In the past, the treatment was controversial, with deaths resulting from poorly administered courses of immunotherapy.
But the committee's special adviser, Professor Barry Kay, said the treatment had moved on from the "bad old days" and injections of allergens were carried out in environments with full medical back-up to treat a bad reaction or potentially fatal anaphylactic shock.
Baroness Finlay said: "By failing to make use of this potentially life-saving and cost-effective treatment, the short sighted approach of the Department of Health is not only wasting money, but is also subjecting a large number of allergy patients to an impaired quality of life unnecessarily."
For people with allergies to food, Baroness Finlay said the threat of a reaction was "ever-present".
She said the committee heard evidence that diners with allergies were "put at risk" at restaurants because many caterers and environmental health inspectors were inadequately trained.
The peer added: "Pre-packed food is little better. Vague defensive warnings on food packets mean that food-allergic people often spend more time and money when buying food and may even take the risk of ignoring some warnings altogether."
The committee recommended that all packets of food should specify the amounts of allergens contained within them.
Because of the increased prevalence of children with potentially fatal allergies, the committee recommended reviewing the case for schools holding autoinjectors to administer adrenaline to people suffering an anaphylactic shock.
Baroness Finlay also warned that the effect of hayfever on pupils could be "devastating", particularly during exams where poor results could "blight a career for life".
She said there was a lack of awareness "in all walks of life" to the "potentially catastrophic effects of severe allergic reaction".
Jenny Versnel, director of research and policy at Asthma UK said: "The link between asthma and allergy is well established - for example a large number of people with asthma also have hayfever - so improving specialist knowledge close to home by establishing allergy centres in all regions is a welcome recommendation.
"We also support the promotion of research which seeks to further explore the origins of asthma and allergy, and we urge the Government to work with the NHS to implement the reports recommendations as soon as possible."
Health Minister Ann Keen welcomed the report and said the Government would consider the recommendations and publish a response shortly.
She said: "There are currently more than 90 allergy clinics in England, led by a range specialists including allergists, clinical immunologists, respiratory physicians and dermatologists.
"To build on these firm foundations, we have centrally funded additional allergy and immunology training posts this year and asked the NHS to look at whether it needs to commission more local training posts."
Ms Keen said the Government is working to develop National Occupational Standards for staff involved in allergy and has asked the Royal College of Paediatrics and Child Health to develop "care pathways", which will help health professionals in diagnosing and providing appropriate treatment for children with allergic symptoms.