Police chiefs facing a financial crisis are set to give the go-ahead to a multi-million pound state-of-the-art headquarters.

The futuristic building is part of a £20m Private Finance Initiative (PFI) which members of Cleveland Police Authority are expected to approve before the end of next month.

But yesterday authority members were presented with a report which predicted a £1.8m shortfall in Cleveland Police's 2003/2004 budget.

Authority chairman Councillor Ken Walker warned that council tax payers would have to make up that amount with increased payments of about 23p a week or face a cut in the number of police officers.

"There will be a significant gap between the Government and what it's likely to provide and the services at the level which local people need and deserve," he said.

He blamed the force's growing pensions bill for the latest financial predicament.

"In the coming year we'll face the prospect of having to pay out 16 per cent of the budget - around £16.5m - on supporting our pensions scheme. The cost is just actually growing and growing."

The cost of pensions was likely to be £28m by 2010, he added.

Coun Walker told the Northern Echo that the PFI scheme - for a new headquarters and station in Middlesbrough, community police stations in South Bank and Redcar and a new Langbaurgh headquarters - would be paid for out of central Government funds and private finance and would not affect rate-payers.

"If we decided not to do it that won't make a jot of difference to the financial difficulties we are dealing with now," he said. "It's not about putting a burden on the local tax payer. We are trying to secure the funding from the Government."

Chief Constable Barry Shaw also defended the project. "The main point is that our buildings are falling down and the costs of maintenance goes up each year. We have said to the Home Office 'we need a new estate'. This is a cost effective way of doing it."

But Stockton Borough Council leader Bob Gibson questioned whether now was the time to be embarking on a multi-million pound project. "It's par for the course with Cleveland Police. I don't think many people will be surprised," he said.