THE leader of the North-East’s biggest council is seeking urgent talks about Labour’s devolution drive – warning it could backfire and leave his authority worse off.

Ed Miliband sprang a surprise yesterday (Tuesday) by pledging town halls will keep any increase in business rate revenues in their areas to encourage them to “go for growth”.

At present, the cash is collected by the Treasury for redistribution, to ensure poorer areas – which attract fewer firms – are not short-changed and left with worse services.

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For that reason, the Association of North-East Councils (ANEC) has campaigned against the local retention of business rates, warning an annual £200m ‘top-up’ for the region is at risk.

Now Mr Miliband has vowed that 100 per cent of business rate growth will be kept – not the 50 per cent, under the Coalition – arguing areas will be “tens of millions” better off.

But Simon Henig, Durham County Council’s Labour leader, said: “We need more information about how this will work. We need to see the detail.

“We have warned – and will continue to warn – that if business rates are used as core funding it will mean big differences in the provision of services across the country.

“It’s easy for Westminster City Council to throw up some new shopping arcades, which bring in a lot of extra business rates, but that’s not so easy for an area like County Durham. That argument has not gone away.”

Cllr Henig said Mr Miliband needed to make clear that the switch would be in addition to the existing funding pot, adding: “The report doesn’t go into that detail”.

He welcomed the plan to devolve £6bn of annual spending to local enterprise partnerships (LEPs), three times the sum to be handed over by the Coalition, with the first allocations next week.

However, Cllr Henig dismissed a suggestion by Lord Adonis – the architect of the plans – that directly elected ‘metro mayors’ could rule groups of councils.

In the North-East, such a move might see a single mayor for the new ‘combined authority’, covering County Durham, Tyne and Wear and Northumberland.

But, Cllr Henig said: “Given that Newcastle voted 'no' to an elected mayor, I think it’s highly unlikely that much wider areas will vote in favour.”

Pressed for details about the business rate plan, a Labour aide said only the cash from growth “above projected levels” would be retained locally – protecting other areas.

He added: “That growth would not happen without the incentives we're offering to combined authorities.”

The Miliband-Adonis plan triggered a battle between the parties over which is leading the way on devolution, as the issue rises up the political agenda.

Nicky Morgan, a Conservative Treasury minister, claimed Labour was “playing catch-up”, saying: “The Coalition government have already been doing this in terms of devolving power and money on things like skills, as well as transport and housing, to local areas."

Labour was also put on the back foot over its claim that 80 per cent of private sector jobs created since 2010 are in London. The Treasury said the true figure was 25 per cent.