VOTERS in Durham and North Yorkshire are to be given an option of keeping their counties in a referendum for setting up an elected North-East Assembly.

The Government has backed down from a county council carve-up and accepted a Liberal Democrat proposal that people can have the option of keeping them in the ballot.

Legislation paving the way for a referendum is making its way through the House of Lords. The North-East is expected to be part of the first wave of regions holding a vote.

Under the Government's previous plans, a "Yes" vote would mean local government being re-organised in two-tier county council areas.

Counties would then be scrapped and new single-tier - or unitary - authorities created in their place, partly in order to fend off criticism that regional government would mean more red tape.

But now, voters in county areas are to be given options about what they want to see happen to their local councils.

While there will still be the scrapping of a layer of local government, they will be able to decide if they want Durham or North Yorkshire to stay and become unitary local authorities.

A Liberal Democrat amendment to the Regional Assemblies (Preparations) Bill allowing this to happen has been accepted by the Government.

The party's local government spokesman, Edward Davey, said the concession prevents what he called the "absurd situation" in which city voters could vote to scrap counties.

"These important changes will, for the first time ever, give local people a voice in their form of local government. This is a victory for democracy and significantly improves the chances of referendums on regional assemblies actually being won.''

Local Government Minister Nick Raynsford said he was happy to accept the amendment, which he claimed was about choice.

But he said he would be pressing ahead with plans for wholly unitary local authorities in areas with regional assemblies. "It is simply not acceptable just to add an additional layer of government," he said.