THE rural North East could be left without enough money to fund essential council services, leaders have warned.
Northumberland County Council is worried that a Government funding shake-up will severely disadvantage rural areas.
Ministers want to see councils handed control over the business rates they collect from local firms, ending the current process in which the money is handed to the Government and redistributed based on a council’s needs.
But the cash collected in sparsely populated Northumberland is far less than that handed back to it by the Government, meaning a multi-million pound funding gap could hit the council.
Already the authority is making £45m cuts in just one year, leading to plans to axe hundreds of jobs.
Council leaders have been given assurances that no authority will lose out, although critics have pointed out that this may not last past the first two years of the changes.
Jeff Reid, the Liberal Democrat leader of the council, said the predominantly rural nature of Northumberland means it will be difficult to create the sort of business growth the Government hopes will help replace any eventual cash shortfall.
He said: “A direct move to localisation of business rates would be damaging to Northumberland because of the nature and make-up of the county’s economy.
“Because it is primarily a rural area Northumberland would lose out if business rates were simply reallocated to each local area under the new system.
“However the Government has acknowledged that this is a problem across the country and some kind of equalisation is recognised as a vital part of any new finance model.”
He added that while he welcomes the Government’s assurances that no authority will lose out, “the devil is in the detail.”
Mr Reid’s concerns are the latest to emerge in the biggest shake-up of council funding in decades.
Newcastle Council recently told the Government it did not trust its promise to make sure no authority loses out, citing similar assurances given during funding cuts which disproportionately hit the North East.
Nick Forbes, the Labour leader in Newcastle, said there was a real worry care budgets could suffer if the Government sends funds South.
He said: “At present there is a minimum standard of care you can expect to receive in England. But under the changes proposed there is a real fear that local authorities in the North would not be able to afford to fund the same level of care as those in the South.
“We would see a huge level of inequality open up in social care linked to the difference in council tax base.”
The Department for Communities and Local Government has said it will finalise protection for poorer councils in its funding consultation.