TOWN halls across the region were handed almost £9m of government cash yesterday as a "reward" for providing an extra 6,500 new homes.

But North-East council leaders have already protested the grants are a drop in the ocean next to the whopping £275m that will be swiped from their housing budgets by the end of the decade.

And the figures revealed that in some areas - Middlesbrough, Gateshead, South Tyneside and, in North Yorkshire, Craven and Richmondshire - the number of empty homes is on the rise.

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The row blew up after the latest allocations were made from the flagship 'New Homes Bonus', designed to hand a direct incentive to councils to build badly-needed new homes.

The largest sum went to County Durham council (£2.25m), for building 988 new homes in the year to October 2012 and for bringing a further 769 vacant homes back into use.

Large grants, for 2013-14, also went to Newcastle (£0.95m), Stockton-on-Tees (£0.93m) and York (£0.6m), the department for communities and local government (DCLG) announced.

But other authorities received much smaller amounts, including Darlington (£0.29m), Middlesbrough (£0.35m), Hambleton (£0.2m) and Richmondshire (£0.24m).

Councils are able to spend the cash on improving local services, such as building playgrounds or bus subsidies, or even on reducing council tax.

They will also receive the latest instalments of bonus payments first made in previous years, which means local authorities across England will have been handed a total of £1.3bn since April 2011.

Mark Prisk, the housing minister, said: "For years, developers found themselves at loggerheads with communities unconvinced that their plans for growth would benefit them. But the New Homes Bonus is turning this around.

"Local people are able to see the rewards of new developments in their area - paving the way for thousands of much-needed, locally-supported homes to be delivered across the country."

But the policy is hugely-controversial, because the New Homes Bonus is funded from the scrapping of near-£1bn annual grants for new housing.

Furthermore, the scheme offers higher bonuses to councils building large, expensive homes - built, predominantly, in the South.

They receive a sum matching the amount of council tax received from that property - which means a higher sum for larger, more costly homes - although there is a £350 top-up for each affordable home.

Last month, the Association of North East Councils (ANEC) pointed to the New Homes Bonus among "stealth" cuts that would cost the region an estimated £100m next year.

It raised the alarm over an extra £500m pumped into the scheme - because it was paid for by cutting other grants for new housing, benefiting the South at the expense of the North to the tune of £275m by 2018-19.