Government efforts to help businesses in the West Midlands have been “Maoist and chaotic”, Business Secretary Vince Cable has admitted.

Speaking in Birmingham, Dr Cable said mistakes had been made in the development of new agencies to support employers.

But he defended the policy, saying in the long run it would give more powers to local authorities and bring back civic pride.

The Business Secretary was speaking to the annual dinner of the Lunar Society, the Birmingham-based society for leading figures in the worlds of business, politics and academia.

He highlighted the abolition of the regional development agency, a huge quango called Advantage West Midlands which was set up by Labour to support industry.

It is being replaced by new local enterprise partnerships, led by local councils and chambers of commerce.

This would give Birmingham more control over its own affairs instead of depending on London, he said.

But Dr Cable, who recently visited China alongside David Cameron, said the reforms had been “Maoist”, a reference to the Chinese Communist leader Chairman Mao whose policies led to the deaths of millions of people.

He said: “We’re investing heavily at a local and city level to reverse years of terrible over-centralisation in London that has led to a lack of independence for cities.

“Getting rid of the regional development agencies and bringing in Local Enterprise Partnerships has perhaps been a little Maoist and chaotic, but overall we’re giving back to councils and local authorities the powers and incentives they need to see a resurgence in civic pride.”

Labour MP Pat McFadden (Lab Wolverhampton South East) said: “Vince cable has admitted what everyone knows - that abolishing Advantage West Midlands has been chaotic.

“The new local enterprise partnerships only cover half the country and are dependent on local councils for funding when the councils themselves are having their budgets cut.

“No wonder the director general of the CBI has called the whole thing a “shambles”. If we are to get the growth we need, government has to support the new local enterprise partnerships with proper resources. They are cutting the roots of future growth.”