FIRE services across the region are facing the grim prospect of service cuts and job losses after funding changes left them with a multi-million pound shortfall.

Chief fire officers have urged the Government to think again after receiving details of their cash allocations for 2004/5.

Last night, union officials warned of job losses and pledged to resist any reduction in services. They claimed lives would be lost unless more money could be found.

An internal memo from County Durham and Darlington's chief fire officer, George Herbert, seen by The Northern Echo, illustrates the scale of the problem.

It shows that changes to the Government's methods of funding fire services have left the authority with a likely shortfall of almost £16m in next year's budget.

That amounts to more than half the provisional fire service budget of £29.2m.

Until now, fire authorities have been free to raise extra money above their Government grant via the council tax.

Durham and Darlington have been told to expect a central Government grant of £13.5m. In theory this places a £15.7m council tax burden on local people - a huge increase on the £3.4m levied last year.

But fire chiefs say this option is not open to them because the Government insists local authorities must hold down council tax rises to "low single figures".

A large amount of the cash might instead have to come from cutbacks in the service.

Mr Herbert's memo to all stations confirms: "If this situation remains the same, then the fire authority will have no option but to balance the budget by making savings in the service."

Other services across the North-East are facing a similar situation.

Cleveland Fire Brigade is in talks over its budget, but officials admit that the Government's stance could lead to council tax increases or service cuts.

Stan Wales, of the service, said: "We are out on our own now. If the grant we get is fairly low, the rest has to be made up elsewhere."

North Yorkshire County Council has battled to set a provisional council tax rise of no more than 5.75 per cent for 2004/5. A spokesman refused to comment on fire service provision.

Steve Gregg, chairman of the Fire Brigades' Union (FBU) in the North-East, said the situation was becoming dire. "We really are going below the bottom line now and job losses are the only big way they can make savings," he said.

"It is only going to get worse. We are carrying out many initiatives to install fire alarms and prevent malicious calls, but we get less money for doing it.

"Soon, instead of three fire engines turning out to a fire at a house, there will only be one, and maybe another 15 minutes later."

This year, Durham County Council received almost £16.5m and Darlington Borough Council £3.5m to provide a fire service.

The budget required overall was about £23.4m and the shortfall was made up by council tax contributions.

But changes to the way grants are calculated means the £20m previously awarded to the local councils has been subject to "financial gearing" by the Government, leaving only £13.5m.

Consultation on the issue ends tomorrow. Contacted by The Northern Echo, Mr Herbert said the issue was at a sensitive stage. Service cuts were possible if the Government would not offer a more "realistic" settlement.

"That, in my view, is not the way the Government wants the fire service to go," he said.