DAVID Cameron vowed yesterday to torpedo a Government plan to help fund a £140m Tees Valley Metro system - warning it would drive away businesses and jobs.

The Conservative leader attacked the proposal for town halls to levy a "supplementary business rate" on local firms, to raise tens of millions of pounds for key projects.

The idea is aimed specifically at accelerating tram schemes, such as the 30-year-old dream of building a Metro-style light rail scheme across the Tees Valley.

In an interview with The Northern Echo, Mr Cameron warned that a supplementary business rate would be viewed as a stealth tax.

He said the money raised would probably go "straight into the back pocket of the Exchequer" and over-taxed firms would leave the area.

Instead, Mr Cameron pointed to a suggestion, in a report drawn up for him by Lord Heseltine, that councils keep a share of the rates from attracting new businesses.

Other ideas were authorities selling bonds - which the government has also explored - and having more directly-elected mayors, to boost the profiles of towns and cities.

Mr Cameron said: "There is such a history with this government of new taxes turning out to be stealth taxes."

Last November, Tees Valley Regeneration submitted its case for the Metro scheme to the department for transport (Dft), with the hope of getting the go-ahead next year.

Trams would link Saltburn to Darlington, serving major sites including Durham Tees Valley Airport, with new track alongside existing rails.

Future plans could bring extensions to Hartlepool and Nunthorpe.

However, the Dft has said it would require a "local contribution" of about ten per cent - about £15m - from local councils or other agencies.

The supplementary business rate, applied to the rateable value of business properties, would raise several tens of millions from firms in an area such as Tees Valley.

The levy could, in turn, be used to fund loans - permitting councils to borrow up to seven times the annual income from the charge.

This week, the government highlighted the proposal as one of the key extra powers it wanted to give to local authorities. A final decision will be made later in the year.