GOVERNMENT statisticians are examining how the national census miscalculated the population of Middlesbrough, possibly costing the town £2m in grants.

The 2001 census put the town's population at 134,000 but figures collected for Middlesbrough Council suggest it has been underestimated by up to 5,000.

The shortfall means the authority would have been awarded a greater support grant, so council tax need not have risen so sharply last year.

After representations from Mayor Ray Mallon and MP Dr Ashok Kumar, the Office for National Statistics has agreed to review Middlesbrough's position.

In a letter to the council, National Statistician and Registrar General Len Cook said: "We have carried out a further analysis of the 2001 census results in relation to a number of criteria.

"This analysis has led me to conclude that there are two local authorities, one of which is Middlesbrough where I would like to begin work to review population estimates," said Mr Cook.

Mr Mallon welcomed the move, which could wipe out nearly all the £2m overspend in the council's social services department if the difference is paid out.

He said: "This is very encouraging news. Both the council and supporters like Dr Kumar have put a lot of work into seeking redress for what we think was a serious miscalculation, which has cost the council dear.

"It is important that we get the maximum amount of resources for essential services in Middlesbrough and we cannot do that if out population is being underestimated.

"I am pleased that the Office for National Statistics is re-examining our position. We'll certainly work with them and make all of our finding available to them."

An independent study carried out by Tees Valley Joint Strategy Unit put Middlesbrough's population at 139,000 and took figures from child benefit claims, school rolls and health records.