A COUNTY council that has been asked to pay back £1m to the Government has warned services could be hit.

The Office of the Deputy Prime Minister has told North Yorkshire County Council that it gave the authority too much money last year.

The error came to light after the Government recalculated the grant it gives to local authorities for the 2003/04 financial year, taking new population figures into account.

Senior councillors warn the move could mean cuts to services and further increases to council tax bills.

Councillor John Weighell, leader of North Yorkshire County Council, said: "The Government are arguing that they miscalculated our population. It amounts to another assault on the delivery of services in rural areas.

"We already face extreme pressures in delivering services such as social care and highway improvement.

"This will be a devastating blow if it is implemented."

The Government plans to recover a total of more than £26m from local authorities, including North Yorkshire. This money will then be redistributed to other councils.

"The council will be making strong representations to Government as we believe this is extremely unfair," said Mr Weighell.

The recalculation means next year's council budget could be reduced by a further £1m.

The council leader is writing to the Minister for Local Government, Nick Raynsford, objecting to the redistribution.

A Government spokesman admitted an error was made with the original calculation for last year's revenue support grant. He said it was now being rectified.

"Councils have known about this for more than a year," said the spokesman.