Image caption Lord Heseltine has looked into ways of improving the economies of English cities such as Manchester

The government has announced it will accept most of former deputy prime minister Lord Heseltine's plan to stimulate the economy.

A report by the Conservative peer recommended devolving power to the English regions and setting up a single local growth fund to deal with skills, housing and transport.

Chancellor George Osborne praised Lord Heseltine for having "bold ideas".

Ministers have accepted 81 of the 89 recommendations put forward.

Lord Heseltine was asked by David Cameron to look into ways of improving the economies of English cities other than London.

'Certainty'

Media playback is unsupported on your device Media caption Heseltine: London has sucked power from English cities

His report - No Stone Unturned - was published last November and it advocated using Local Enterprise Partnerships to decide the allocation of central funding to projects.

Lord Heseltine, who also served as trade and industry secretary during the early 1980s, said cities were "pulsing with energy" which was not being used enough to help the UK towards sustained growth.

Birmingham is the first city to be given the single funding, with the Greater Birmingham and Solihull areas to benefit.

In its formal response, published two days ahead of the Budget, the Treasury said it had accepted 81 of his proposals, rejected five - and will look further at the remaining three during the forthcoming Spending Review.

Chancellor George Osborne said: "We asked Lord Heseltine to do what he does best: challenge received wisdom and give us bold ideas on how to bring government and industry together. He did just that, and that is why we are backing his ideas today."

Business Secretary Vince Cable added: "We have grasped the challenge that Lord Heseltine's report posed to government and accepted the vast majority of his recommendations.

Recession fears

"The plans will boost the UK's competitiveness nationally and drive local growth through... deals that we will be negotiating with every Local Enterprise Partnership.

"In line with Lord Heseltine's report, today we have also announced a package of wider support that is a big vote of confidence for our industrial strategy, particularly the aerospace, automotive and agri- technology sectors.

"This support not only gives businesses certainty, but shows the government is determined to back those sectors where Britain can deliver and compete on a global scale in partnership with industry."

The UK economy shrank by 0.3% in the final quarter of 2012, leading to fears of a third recession since the beginning of 2008.

For Labour, shadow chancellor Ed Balls said the report "underlines the short-sighted decision to abolish the regional development agencies in 2010".

Shadow business secretary Chuka Umunna said: "Lord Heseltine's approach of devolving economic power and giving local areas the resources and tools to drive growth is welcome.

"However ministers must not use his proposals as a smokescreen for cutting the various budgets which are being pooled and devolving blame for this. We will be keeping a watchful eye over implementation to ensure that this is not the case."