JIM Parker smiles as he reaches for a pile of letters sent from the great and not-so-great of Britain's writers. They're all there, from famous racy novelist Jilly Cooper down to the fellow who writes the history book of his local village. Each card, note, letter, telegram essentially says the same thing: "You're wonderful - and thanks for the cash".

They know that Dr Jim Parker and his team of just 15 staff represent the entire Public Lending Right department, thought to be the government's smallest.

They are the people, tucked away at Richard House in the heart of Durham University's campus in Stockton, who work out how many books, by which author, are borrowed from our public libraries each year. They do the job so our authors can receive some money - 4.21p for each loan - for their efforts.

"You are wonderful," exults Jilly Cooper's message. Well known children's writer Sue Heath goes a step further. Next to her note is a professional-standard drawing of a woman dancing around her kitchen. "That's me when I got your cheque," she says.

Other messages from much less well- known writers are among Jim's favourites, like the one that says: "Thank God! That £50 cheque you sent me has paid the gas bill, thank you so much."

"It's not just about money for the writers," says Britain's only registrar of public book lending - or Jim, as the Scotsman is known by his entire team. "There's the psychology of the thing. Before we existed many community, child or local history writers beavered away with not the faintest clue of how many people were actually reading their books. It is lovely for them to know that someone, somewhere is reading their stuff. It can elate them."

Jim says that there is sometimes a situation whereby a local author, working away for his own community, gets an unexpected windfall. "What happens is we change what library we monitor," he says. "We look at about 15 per cent of all libraries across the country, including, for the moment, Stockton library across the way. That means the author who wrote, say, The History of Thornaby, of no interest anywhere else but round here where it will be borrowed a lot, finds himself with a few pounds for a year or two. Those people are often overjoyed. The problem is that when we move on that goes, although there's always someone, somewhere else with the same story."

Jim explains how the system works. Each author, who must be from within the European Union, must register with the PLR to receive an annual payment direct from central government. That means, first of all, that he or she must be alive to register. Given that the scheme didn't start until 1982, just about all the greats of British literature like Dickens, along with best-selling authors like Enid Blyton, miss out. On the other hand, when authors die payments are still made to their estate for 70 years after death.

Jim says that this year has been a special year for the 35,000 registered authors across the UK and the EU because the payment per loan has risen from 2.67p to 4.21p. That has led to a near doubling of the number of authors who receive the maximum payment of £6,000, from 130 last year to 251 this time round. Great news for some, but for writers like the late Catherine Cookson (whose books were one year borrowed five million times) it is peanuts.

The minimum payment for any writer is £5, which means that any book must be loaned more than 119 times for the author to receive any cash at all.

To work all that out the PLR - which will distribute £6.2m to authors this year - does not count every single loan. Instead they monitor the computer records at selected libraries and extrapolate their figures from there.

So there are winners and losers but the fact that the PLR exists at all represents a major victory for our writing community. That it is based in the North-East instead of being tacked on to some monolithic government office block in London is little short of a miracle.

"We're proud of coming from here. I always tell everyone in Britain that we are a North-East organisation," says father-of-two, Jim, 50, who lives at Kirklevington, near Yarm.

"It was a decades old fight for us to exist at all. There was this rather wonderful coalition of writers fighting for it. There were ten Bills before the House of Commons passed it. That it was finally passed is largely thanks to Michael Foot who got it through in the dying days of the Labour government in 1979.

"That we came here was down to the fact that there was a government department for education office which already existed in Darlington. We've got members of staff who've been with us for 20 years. That has been a fantastic asset for us. And yet very few people in the North-East even know we exist."

A side benefit of establishing the tiny PLR - "if it's not the smallest then it must be pretty damn close," as a Government press officer says - was the fact that, for the first time, somebody was working out just what kind of people were borrowing what books in different areas of the country.

So now we know that Catherine Cookson is the queen of the adult fiction writers with phenomenal loans - although she is now losing ground to Danielle Steel and Josephine Cox. We know that 44 per cent of all payments go to authors in London and the South-East and just two per cent to North-East writers. We learn that JK Rowling's Harry Potter and the Chamber of Secrets is this year's most borrowed book, replacing Cookson for the first time, despite Rowling not even being in the top ten this side of the Humber.

However not all the statistics collated by the Teesside team make good reading. There was a total of 5.6 million book loans back in 1991. The latest estimates put the figure for last year at 3.8 million. It appears that a 150-year-old British tradition is beginning to die, a tradition which has served millions of British people who previously had no access to books.

Or is it? "Look at the children's books sections," says Jim. "Five of the top 13 titles overall are from children's authors. That's because, contrary to popular opinion, children are reading books. There will be libraries with us for some time yet."

With that Jim and his hidden team return to their work helping nurture Britain's great literary community.