The north-south divide is alive and well despite four years of a Labour government, Peter Mandelson said on Friday.

Speaking in his Hartlepool constituency, the former minister admitted that gaps remained in economic performance between the south east and the rest of the country.

Mandelson said he agreed with Tony Blair that disparity within regions was a problem, but concluded "London and the south east is the richest region in the European Union".

He said: "Certainly there are sharp differences in performance between communities within the north east region. But the statistics show that a large performance gap between regions remains."

He said that in contrast with the south east in "every other part of the United Kingdom standards of living are below the European average".

Mandelson said that the creation of a system of election regional assemblies would begin to address the north/south divide.

He said central government often lacked the cutting edge required to tackle regional problems. "There is an excess of central government control of this activity and too little integration of it takes place across departmental boundaries. The government's reforming energies simply need more regional focus," said Mandelson.

The former Northern Ireland secretary, who is a convert to the principal of regional devolution, said: "We cannot achieve economic revitalisation in the north east without modernising the means of delivering our economic policies - and this means renewing the region's political institutions."

Setting out how these new intuitions might work, Mandelson said they should be partly appointed and partly elected with members being drawn from unions, business, education and commerce.

Labour should pledge referendums on regional government in its general election manifesto, Mandelson believes.