THE North-East was yesterday promised a £50m windfall under Government plans to help attract new businesses.

Council chiefs will be allowed to keep some of the money raised from extra business rates as a reward for encouraging firms to rundown areas.

At present, all business rates are automatically handed to central government, which redistributes some of the money to town halls under a set formula.

Now, the shake-up is expected to hand local authorities across the North-East about £50m over three years, based on past growth figures.

There would be no constraints on how the money was spent - leaving councils free to boost spending on anything from teachers' salaries to local parks.

The announcement follows a three-month Treasury consultation that found strong support for the change among both local authorities and businesses.

The Government estimates that the scheme could be worth up to £1bn to local authorities nationally.

John Healey, the economic secretary, said full details of the shake-up would be included in next year's Budget and would come into force in 2005.

He said: "Local authorities have a crucial role to play in our society, acting as community leaders, delivering services, and working with partners to promote economic development at the local level.

"The Government is committed to doing more to give them the resources and freedoms they need to tackle barriers to enterprise, employment and growth."