THE financial catastrophe that ruined plans for a Millennium celebration of railway heritage has forced local authorities to write off thousands of pounds, it emerged yesterday.

Rail 2000, the company behind the doomed Millennium Cavalcade of Steam, which collapsed three years ago, went into liquidation with massive debts.

Two councils in the region have now abandoned all hope of recovering the money they pledged to the event, which was to feature several locomotives and was designed to attract visitors from across the world.

Both Darlington Borough Council and Sedgefield Borough Council gave loans of £25,000 to the project, which had been timed to coincide with the 175th anniversary of the creation of the Stockton and Darlington Railway.

Sedgefield council has already written off the loan, and Darlington is expected to follow suit on Tuesday.

Rail 2000 went into liquidation in July 2000, following strong speculation that it was facing serious cash flow problems. It was dissolved in November 2001.

The liquidators' report said claims had been received from two preferential creditors for £4,402, and 52 unsecured creditors totalling £440,083, including the councils.

A spokeswoman for Darlington council said yesterday: "It is regrettable that the event was unable to take place, and the cabinet is being asked to write off the funding.

"We were expecting to get the money back, but that is now not a possibility."

Gosforth accountancy firm Tait Walker was appointed to carry out the liquidation and a spokeswoman said that the file on the firm was closed.

She said: "No dividends were paid to any class of creditor, and the details were passed to the Department of Trade and Industry."