THE Government admitted last night that it had greatly under-estimated the costs of creating three new unitary authorities under a possible shake-up of local government.

People are being asked to vote on whether to replace the two-tier system of councils with a single layer of local government, either one county-wide authority or with three smaller authorities created by amalgamating existing district councils.

An earlier government leaflet sent to every home in the county said the difference in start-up costs between the two options would be £1m.

However, Local Government Minister Nick Raynsford has now announced that the cost of setting up three new councils would be £49m compared to £37m for a single county-wide authority - and a second leaflet rectifying the mistake will be sent to every home in County Durham.

Durham County Council leader Councillor Ken Manton said: "We have always maintained, from the very outset, that it would cost significantly more to set up any multiple of all-purpose councils rather than just the one, and today's announcement certainly confirms that.

"We have also maintained that a cluster of unitaries would cost many millions of pounds more a year to run than one.

"Our latest estimates, based on the most comprehensive exercise yet carried out, suggest it will cost almost £25m a year more to run three unitary councils than one.

"Despite repeated challenges, we have always maintained that our calculations are broadly accurate, and today's admission by the minister that the Government's own figures were significantly wide of the mark must serve to lend even more weight to our own financial assertions.

"These cost differences are very important for people to understand, and we are grateful to the Government for putting the record straight," he said.