The fight for a fairer funding system will be stepped up tomorrow when council leaders argue for an extra £130m for the North-East.

Coun Tony Flynn, chairman of the Association of North East Councils, will lobby Northern MPs to highlight the "substantial discrepancies" between funding in the north and the south.

The current Standard Spending Assessment system (SSA) which determines how much cash is allocated to local authorities is being reviewed by the Government.

Campaigners for fairer funding want the new system to be based on need rather than population. They say improvements to the formula could bring an extra £130m to the deprived North-East ever year.

Said Coun Flynn: "We have been losing money over a period of time, largely because a lot of funding criteria is based on population yet we still have the same fixed needs and requirements.

"There are substantial discrepancies in the funding criteria."

Coun Flynn will launch 'A Fair Deal for the North-East: Reducing Regional Disparity' when he meets with the Northern Group of Labour MPs today.

He said one example of unfair funding was with children in care where money was allocated to social services by using a "Kids in Flats" indicator.

The proportion of children living in care in flats is two per cent in Durham compared with 82 per cent in Westminster, London. It means Durham kids receive £149 per child compared with £579 for Westminister.

Said Coun Flynn, who is also leader of Newcastle City Council: "It is almost four times the amount paid to London authorities for children in care."

If the current review of local government funding fails to bridge the north-south divide, it will mean further misery for council tax payers who faced average hikes of ten per cent in their bills this year.

Coun Bob Gibson, leader of Stockton Borough Council, said: "We are desperately short of social services money and most of the authorities in the region are exactly the same.

"We really do need a shift of resources from the south to the north funded on need. We need extra funding for the population drift and not less."

North MPs have already demonstrated outside Westminster over the funding disparity.

No final decision on a new formula will be made until December with the new system introduced in April.