DAVID Cameron last night sparked outrage in the North-East after suggesting that savings from austerity measures could be used to fund tax cuts.

The Prime Minister said money from future public spending savings could be given to "hard-pressed families".

But his proposal was greeted with anger by North-East local authority leaders who claim the region has been disproportionately hit by Government cuts.

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Senior councillors claimed that using further savings to fund tax cuts would be another example of money being sucked out of the region and handed to wealthier areas in the south.

Councillor Paul Watson, chair of the Association of North East Councils (Anec), said it would be “immoral” if savings from austerity measures were used to fund a reduction in the top rate of tax.

“To say we could use even greater austerity measures to give people tax cuts would be very, very wrong," he added.

“This suggestion is just another demonstration of how the government has transferred the resources from the poorer and more needy regions to the more affluent southern areas.”

Darlington Borough Council leader Bill Dixon, vice chair of Anec, accused the Prime Minister of engaging in the “economics of a madhouse”.

“People may have a few quid in their pocket but they won’t have enough to replace the things that we’ve lost because of government cuts – the libraries, the leisure centres.”

The row has erupted as councils across the region increase council tax bills rather than accept a Government grant to freeze the tax.

According to the Chartered Institute of Public Finance and Accountancy's (Cipfa), the North-East now has the highest council tax in the country.

Cipfa's annual council tax survey reveals that bills will rise by an average of 0.9 per cent in the North-East and Yorkshire in 2014/15.

This will mean an average bill of £1,549.10 for a Band D property in the North-East and £1,440.55 in Yorkshire and the Humber.

In the face of huge budget cuts, many of the region's local councils have opted to increase the tax by as much as 1.99 per cent - with two per cent rises triggering a local referendum.

The Government has offered councils a grant equivalent to one per cent of their council tax income if they freeze the tax.

In the North-East, several councils including Hartlepool and Sunderland have accepted the grant, although many have not.

One of the latest councils to set a 1.99 per cent increase is Redcar and Cleveland.

Explaining the decision, Norman Pickthall, cabinet member for corporate resources, said: "Even with this modest increase in place the council still has to make 19.8m in savings over the next three years, as a result of Government funding cuts and service demands.

"Accepting a Government grant to freeze council tax would only provide short term relief and would cost the council a further 2.6m by the end of the decade.

"Councillors felt that they had to reach an appropriate position that balances service delivery needs against a council tax increase."

A study released today (Wednesday, March 5) by the York-based Joseph Rowntree Foundation claimed the council tax system was "unfair, unpopular and outdated".

According to the report, After the Council Tax: Impacts of property tax reform on people, places and house prices, policy makers and politicians should start thinking about long-term replacements for council tax.

The charity stated that it was becoming unsustainable for ministers to offer grants to freeze council tax.