George Osborne stands accused of making empty promises on devolving power to the North East when punishing cuts leave councils crippled.
The North East has the highest unemployment rate in the country - 9.3% compared to the UK average of 6% - and MPs from the region say disproportionate spending cuts are limiting the work of local authorities.
Bridget Phillipson, MP for Houghton and Sunderland South, said it is proof George Osborne is not willing to work with councils to devolve power.
It comes as the Treasury boss agrees a £1bn devolution agreement for Greater Manchester and revealed similar deals will be drawn up for Leeds and Sheffield.
Ms Phillipson said: “George Osborne is now apparently the ‘champion of the North’ after his recent announcement on powers to Greater Manchester.
“But when I asked him if he would support a fair deal for North East councils, which have been forced to endure huge and disproportionate year-on-year funding cuts since the 2010 election, he refused to consider it.
“There is no point in promising to work with North East councils if they have no funds to work with. Frontline services have already been affected by four years of cuts, and further cuts are planned in the near future.
“If the Chancellor is serious about supporting Northern economies then he needs to understand that the North doesn’t end at Manchester or Leeds.
“He should reverse his decision to slash the budgets of Tyne and Wear councils and give them a fairer funding deal.”
The North city devolution deals come in addition to news the second phase of the high speed rail line, HS2, will reach Manchester and Leeds.
Mr Osborne says journey times on trains to this region will be slashed and this will help create a ‘northern powerhouse’ to rival London’s economic dominance. Labour, however, says the ‘powerhouse’ project is a play for Tory and Lib Dem marginal seats in the North West and Yorkshire.
Mr Osborne is set to reveal the A1 will be upgraded in his Autumn Statement on December 3, but there has been no hint of further plans for the North East.
Catherine McKinnell, MP for Newcastle North and Labour’s Treasury spokeswoman, also attacked Mr Osborne in the House of Commons on the issue.
She said: “The Chancellor talks about creating a northern powerhouse, but really is he not just struggling to play catch-up, because while he has been shifting funds from northern cities to wealthier parts of the country, the unemployment rate in the North East is the highest in the country, wages for working people in the North have fallen by even more than the national average and across the North the number of people unemployed for a year or more is up 62% since the last election?
“Why will he not match Labour’s plan to devolve real power and £30bn of funding not just to the north, but to all city and county regions?”
Ms Osborne accused Labour of failing to devolve power when it was in Government and has insisted he will work with local authorities in the region.
He said: ”The whole United Kingdom has had to make difficult decisions because we inherited a record budget deficit, but I am willing to work with councils in the North East to see whether we can build on what we have achieved in Greater Manchester.
“There is real potential to do that and to make key investments in the infrastructure of the North East. For example, I think there is a strong case for the A1 north of Newcastle to be dualled.”