A FUNDING formula which has short-changed the North-East by more than £100m is to be challenged by the region's local authorities today.

A delegation of senior financial experts from the Association of North-East Councils is to visit Whitehall in an attempt to persuade the Government to ditch the formula, which they claim cost the region £17.4m in the last year.

The authorities want to overturn the Area Cost Adjustment, the regulations which help determine the amount of Government grant handed out to local councils.

At present, authorities in London and the South-East benefit from the formula which is weighted to take into account the extra costs of hiring staff and running services in and around the capital.

The formula, which was drawn up in 1992 and has not been amended since, takes into account the wages staff could expect to earn in the private sector. Critics say that means poorer parts of the country are expected to subsidise the rich South-East because of over-inflated City salaries.

The association has carried out the first research since the regulations were introduced. The study determined that, over its lifetime, the funding formula has been worth more than £1bn to the South-East, while the North-East has lost out by more than £100m.

The association is now lobbying the Office of the Deputy Prime Minister for an alternative system which, it claims, would be fairer to the region, and the Government is considering a review in the summer.

Association chairman Councillor Bob Gibson, leader of Stockton Borough Council, described the system as "out of date" and "unfairly weighted towards London and the South East".

He said: "It cannot be right that people in the historically-poorest part of the country, the North-East, are paying more than the people living in the richest part and who earn, on average, considerably more, and have benefited substantially more through the rise in house prices."

He said: "There is a real possibility that council taxes - and thereby the pressures on local authorities - could be reduced for the North-East and other regions of the country, if the association's findings are adopted."

The association claims that a revised settlement could be worth around £25 a year to most North-East council taxpayers.