The Labour government is in denial about the continuing existence of the north-south prosperity divide, which it has failed to close despite 10 years in power, according to a left-leaning think-tank.

A new report from the Institute for Public Policy Research North, to be published in October, will highlight that England's northern regions and Midlands were, in relative terms, further behind the UK's average figure in 2005 for output per head - termed gross value added by economists - than they had been in 1997.