George Cadbury built the Birmingham village of Bournville to boost his ego, Local Government Secretary Hazel Blears has claimed.
Ms Blears said the development of the model village "owed more to paternalism and the aggrandisement of the benefactor, than real concern for residents".
Bournville was created by Cadbury who, with his brother Richard, ran their cocoa and chocolate factory in the new suburb.
As well as providing high-quality housing for staff, they pioneered pension schemes, joint works committees and a full staff medical service.
As they were Quakers, no public houses were built in Bournville - a point Ms Blears picked up on.
In a speech to the Fabian Society, she said she preferred Milton Keynes to communities built by industrialists, such as Bournville, Saltaire in West Yorkshire and Port Sunlight in Merseyside.
Ms Blears admitted: "I personally have more time for this ideal for urban living, than I do for the utopias built for the workers by industrialists such as Saltaire, Bournville, or Port Sunlight, which I have always felt owed more to paternalism and the aggrandisement of the benefactor, than real concern for the residents. And you couldn't get a drink!"
The Minister also warned the UK was in danger of creating "social apartheid", with rich and poor and members of different ethnic groups living in separate areas.
She said: "When we consider the impact of immigration on some of our towns, cities, and latterly rural areas, we must ensure that community cohesion is maintained, and no one faith or ethnic group can totally dominate a locality to the exclusion of all others.
"There is nothing wrong with enclaves of particular groups - every city benefits from its China Towns, Little Italies or, as in London, Bangla Town, Kangaroo Valley or Little Korea.
"But no neighbourhood should be dominated by one group in ways which make members of other groups feel alienated, insecure or unsafe."
She was condemned by her Conservative shadow, Local Government and Communities Secretary, Eric Pickles, as he visited Solihull.
Mr Pickles said: "This is purely spin in a desperate attempt to grab a headline, and is totally undeliverable in policy terms."
