Cameron: Insane to move northerners to London

A report by Policy Exchange said it was time to give up on cities such as Liverpool and accept that the best solution would be to expand the capital to take in newcomers.

But Mr Cameron, on a three-day tour of the North-West, distanced himself from its conclusions saying: "The authors have themselves admitted it is barmy. It isn't, it is insane. Regeneration of our northern cities has been a key Conservative theme over the past three years, and one of the first things I did as leader was to set up the Cities Taskforce to look into how we can further renew and regenerate our great cities."

Government minister Vera Baird, the MP for Redcar, said: "Cameron can distance himself from this all he wants but he needs to explain why his friends have no faith in the North. This is exactly the sort of vindictive, anti-northern thinking that led to the widespread industrial decline of the North under Thatcher. Apparently this is once again in vogue in Notting Hill."

Authors Tim Leunig, from the London School of Economics, and James Swaffield, from Policy Exchange, say in the report, Cities Unlimited, that a decade of Labour's regeneration policies had failed to narrow the North-South divide and that cities such as Liverpool should be allowed to shrink.

It also recommends expanding London by 450,000 homes. It says: "There is every reason to think that London is currently below its economically optimal size. No one is suggesting that residents should be forced to move but... regeneration, in the sense of convergence, will not happen because it is not possible."

It recommends allowing landowners to convert half the 6,528 acres of industrial land into residential land for 50,000 houses and increasing London's size by a mile to allow for another 400,000 houses.

Dr Oliver Marc Hartwich, chief economist for Policy Exchange, said: "No doubt some people will claim that these proposals are perhaps plain barmy. But the issue is clear: current regeneration policies are failing the very people they are supposed to be helping." An independent survey in Country Life of 1,100 city dwellers found that 80per cent would prefer to live in the countryside with 97 per cent believing it had lower crime levels than the city.