An inquiry has backed Gordon Brown in a row with European Union officials over funding for deprived regions of Britain, including the West Midlands.
Brussels has been pushing Britain and other wealthier countries to increase the amount they contribute to regional funds designed to help the poorest parts of the EU.
They say extra cash is needed because of the entry to the EU of nations such as Poland and Hungary, which suffer from poverty far worse than anything found in Britain.
Unless more money is poured in, the EU funds will be diverted to the new member states, and the UK will be entitled to next to nothing.
But Mr Brown has refused to provide extra cash - arguing that the British Government can fund regeneration projects in Britain, rather than giving the funding to the EU and then making regions apply to Brussels for a share.
The House of Lords European Union Committee today backed the Government’s position - even though it could cost Britain around £748 million per year in EU funding.
They argued that development investment in wealthy regions should be done by the national governments, and EU regional development funds should be focused on the poorest regions of the EU, often found in the newer member states of Eastern Europe.
Baroness Cohen, Chairman of the House of Lords EU Committee on Economic and Financial Affairs, said: “It makes no sense for significant regional funding to continue to be ploughed into rich regions of more wealthy member states like the UK, France and Germany when even the richest regions of states such as Bulgaria and Romania fall well below EU averages of GDP per head.”
They added: “We may find that by providing adequate investment in the poorer regions of Eastern Europe we open up significant opportunities for British business in the future.”