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Vince Cable has outlined details of 24 local enterprises partnerships (LEPs) that will replace regional development agencies by 2012.
Those areas in England hit by public spending cuts and jobs losses could receive a share of a new £1.4bn regional growth fund aimed to "rebalance the economy".
The White Paper on Local Growth focuses on shifting power to local communities and business and partners local business and civic leaders together.
In a statement to the Commons, Cable said: "This government's economic ambition is to build a more balanced economy driven by private sector growth."
He said Labour's RDAs were "centrally-led", "unaccountable" and had cost £19bn but left "the economy still as regionally unbalanced as before, if not more".
"It's clear that that policy failed."
Presenting the local growth White Paper to Parliament, the business secretary said local communities and businesses are "in the best position to understand the opportunities and needs of their own economies".
Cable said the government had received 63 proposals from business and civic leaders, voluntary groups and universities on setting up LEPs.
He said: "Together these 24 partnerships represent more than 60 per cent of the economy of England outside London and almost all of our major cities."
And separate discussions are in place about LEPs for London, he told MPs.
The new LEPs are to take on a "diverse" range of roles, including working with the government on setting out key investment priorities such as transport infrastructure.
Cable said they will coordinate proposals or bidding directly for the regional growth fund and support high-growth business through bringing together and supporting "high level consortia" to run new growth hubs.
And the regional growth fund will achieve "sustainable private sector jobs", when the first round of bids is submitted by January 21 next year.
Cable outlined which of the 56 bidding groups have been successful.
Responding for Labour, shadow business secretary John Denham said the plan was a "shambles" and was a result of "reckless" cuts in spending.
Denham told MPs: "This statement cuts the resources for regional development by at least two-thirds.
"RDAs will receive about £1.4bn this year. The regional growth fund will have £1.4bn over three years."
He accused the coalition of producing a "pathetic fig leaf in a bid to cover the absence of any growth strategy".
Labour MP Nick Brown (Lab, Newcastle upon Tyne East) criticised the announcement, highlighting the work of One North East.
He said: "What you have announced today is very wrong. The agency One North East did a very good job for the North East.
"How can you justify some kind of new localism when you are centralising every major decision in your department?"
Former Cabinet minister Ben Bradshaw (Lab, Exeter) said the CBI was "absolutely right" to have described the process as a "shambles".
He added: "Why don't you think again before it's too late and you do untold damage to the economy of the South West?"
In response, Cable said the CBI was "pleased" with the outcome, with ministers working to ensure the process was "driven from the bottom up".
Former Conservative deputy prime minister Lord Heseltine will oversee bids as chair of the Independent Advisory Panel.
The fund, which only applies to England, will operate in 2011/2012 and 2012/2013.
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