Lord Adonis attacked BIS as "not fit for purpose" as he launched a review into how Labour can boost the West Midlands economy.
A senior peer warned that the Business Department doesn't understand regions such as the West Midlands as he launched a new review into how a Labour government could grow the economy.
Lord Adonis criticised the Department for Business, Innovation and Skills (BIS) - warning it was too London-centric and needed to move staff out of the south east and into the regions.
He said: “It is also far too centralised on London, and lacks outreach to – and sufficient knowledge of – the real economy, particularly outside the capital.”
Lord Adonis, a former Transport Secretary, pointed out that BIS once had officials based in regions working for the Regional Development Agencies, which have been abolished by the Coalition Government.
The peer has obtained figures showing that Advantage West Midlands, the former Regional Development Agency, employed 330 people in 2010.
But the Department for Business, Innovation and Skills now employs just 87 people at its office in Birmingham, its only office in the West Midlands. Even this is more than it employs anywhere else outside the south east.
There are 2,473 BIS staff based in London.
But the small regional offices are expected to carry out key roles including briefing BIS Ministers about the state of the economy in the region, supporting Local Enterprise Partnerships - the bodies created to replace Regional Development Agencies - and building relationships with key local employers.
Lord Adonis said: “The small BIS Local offices are not fit for purpose.”
And he added: “The proportion of BIS officials located outside of London should be restored from the current 6 per cent to at least the 16 per cent of 2010.
“This proportion should rise further as sector teams are strengthened. Teams focused on particular sectors might locate – with their directors – in regions where they are most prevalent.
“For example, the aerospace team might be located in Bristol and the automotive team in the North East or West Midlands.”
He made the comments in a report presented to Chukka Umunna, Labour’s Shadow Business Minister.
And the peer has now begun work on a new review commissioned by Mr Miliband which will help determine the economic policies of a Labour government if the party wins the next election.
Over the next few months, he will be touring the country to hear the views of local businesses, colleges and communities taking into account the diverse challenges to innovation and growth faced by the different regions.
Mr Miliband said: “The last Labour government rebuilt our schools and rescued our NHS so that these key services worked better for the people of Britain.
“The next Labour government will need the same level of ambition in rebuilding our economy to secure a recovery made by many which is built to last.
“That is why I am delighted that Andrew Adonis has agreed to lead this independent review on growth.
“There will be less money around so we need new ideas. And that is where the hard work comes in to make the economic reforms needed to create a more responsible capitalism. This is one of the key ways we can make a huge difference to people’s lives while also demonstrating the discipline required to get the deficit down.”
Lord Adonis said: “We need to promote more and better jobs by radically improving skills, the national infrastructure, levels of business innovation, and the strength of key industrial sectors. Government needs to be far more engaged and hands-on to make this happen.”
The review launch comes after Ministers announced £57 million had been awarded to support businesses in the West Midlands in the latest round of funding from the Regional Growth Fund.