MILLIONS of pounds could be ploughed into social services and education in the region - at the expense of homeowners in the South.

People living in the South-East of England were warned at the weekend that they may have to pay up to 50 per cent more council tax over the next three years to subsidise vital services in the North.

The move could shift about £500m away from the South and help fund new Government handouts to the North.

The Government is considering a range of options for alterations to the formula of deciding how much each local authority receives from central funds.

Among the big winners of such a future scheme are expected to be councils in Tyne and Wear and Yorkshire.

North Yorkshire County Council has long faced budget dilemmas over social services after receiving poor cash settlements from central Government.

Council leader John Weighell said the authority was hopeful of securing extra cash from any shake-up:

"We are certainly looking for quite a number of millions for social services but whether we will get it or not, I don't know," he said.

"We have been running at a deficit now for three years and will probably have a deficit again this year, so we do need a very considerable extra amount of money.

"Everything is just speculation at the moment, but there will be winners and losers."

The Treasury subsidy to councils presently runs at £264 for each resident of the South-East, compared to £485 per head in the North-East.

Local authority leaders in the South have condemned the idea, saying the needs of the North should be funded by the Government and not the pockets of their homeowners.

Ken Thornber, leader of Hampshire County Council, said: "The proposed reduction in grant leaves councils with little choice but to make everyone in the South-East foot the bill through excessive council tax rises to avoid severe and highly damaging cuts to services."