English regions are offered the chance of devolved power

Local Government Tories say Prescott is destroying the cherished map of Britain by replacing county councils with new mini-parliaments

England is to get up to eight new mini-parliaments with tax-raising powers under plans published by John Prescott, the Deputy Prime Minister, to transform the local government map.

He announced moves yesterday to create regional assemblies with power over economic growth, planning, transport and housing as the final stage of Labour's devolution drive.

Referendums would be held in areas where ministers believe there is local pressure for regional government, with the first assembly likely to be established in the North-east within the next five years.

However, there are few immediate signs of support for the idea elsewhere and business chiefs accused the Government of setting up a costly bureaucracy which would undermine work already under way to attract foreign investment to the regions.

Presenting a White Paper, Your Region, Your Choice, Mr Prescott told the Commons that the moves would "bring decision-making closer to the people of England".

He said the assemblies would contain 25 to 35 members elected by proportional representation. Each assembly, which will cost an estimated £25m a year to run, would choose a full-time leader and an inner "cabinet".

Although the new bodies would be funded mainly by Whitehall, they would have the power to raise more money through a precept on council tax and by borrowing.

They would take control over economic development, employment, planning, transport, housing, culture and health improvement, and be responsible for Regional Development Agencies.

Where assemblies are approved by local people, the plans could spell the end of local county councils as one tier of local government would be abolished.

Mr Prescott told MPs: "We believe Britain as a whole cannot achieve its full potential unless all of our regions share in success and drive that success. Opponents of these proposals must answer this question: if devolution is good enough for the Scottish and the Welsh, why would they deny that choice to the people of England?"

Theresa May, the shadow Local Government Secretary, said: "We believe that regional assemblies will take power away from local government, will lead to the abolition of county councils and will take decision-making further away from local communities.

"There is only one clear message from this: that it will lead to the abolition of county councils. Counties count. They are historic areas with which people have a clear identity."

Sir Patrick Cormack, the Conservative MP for Staffordshire South, accused Mr Prescott of being "bent on rewriting, redrawing, destroying the map of this country" as people had come to know it and love it.

The Confederation of British Industry said it was "sceptical" about the plans but praised attempts to reduce tiers of government. John Cridland, its deputy director general, said: "Business wants better regional decision-making, but we do not want another expensive and time-consuming talking-shop."

Anthony Goldstone, president of the British Chambers of Commerce, said: "We are disappointed that industry's views will not be represented on regional assemblies."

John Adams, a former Labour adviser on devolution and senior research fellow at the Institute of Public Policy Research, said: "The White Paper is very welcome indeed. In some ways it is even more radical than devolution to Scotland and Wales, and represents the biggest threat yet to Whitehall."

Sir Jeremy Beecham, chairman of the Local Government Association, said: "There are differences of opinion on the issue of regional assemblies amongst the political parties in local government.

"The LGA is keen to ensure that regional assemblies have the backing of local people and that the process for establishing them does not divert councils from improving their services to local people."

Leading article, page 20; Tim Luckhurst, page 21