NORTH Yorkshire councillors are facing the daunting task of digesting major and far-reaching changes in European funding in only a few years' time.

They have been warned that England's largest county could lose millions of pounds in aid after 2006 following enlargement of the European Community by the addition of ten new member states.

A report delivered to county councillors has painted a bleak and uncompromising picture involving proposed changes to European funding and support mechanisms which have been directing money into projects in designated areas of North Yorkshire.

Possible consequences could include loss of all Objective 2 and Leader Plus funding, with no transitional money becoming available, urban areas profiting at the expense of rural communities, a significant reduction in direct subsidies to farmers under the Common Agricultural Policy and an immediate negative effect on the rural economy.

County councillors are to study the changes in more detail on February 12 and the authority will meet district councils and other partner organisations at the North Yorkshire economic development forum nine days later.

There has been substantial investment of Objective 2 funding on the North Yorkshire coast and in the North York Moors national park, where it has helped to boost tourism.

It has also supported rural workspace developments in Swaledale and Wensleydale and is being seen as a source of funding for the planned new National Army Museum at Marne Barracks, Catterick.

Leader Plus is a programme supporting community-led schemes designed to revitalise rural areas.

Europe is looking at new ways of distributing future funding but it is known that after 2006 money from Objective 2 and Leader Plus will be directed towards poorer regions in the new member states.

The report to the county council executive by Jochen Werres, funding and strategy manager in the Business and Community Services Directorate at County Hall, said: "The inclusion of so many poorer regions powerfully reinforces the need for an EU-wide cohesion policy, which cannot only operate in new member states.

"Drastic cuts in regional policy in the existing member states would mean parts of them paying the price for enlargement."

Some European governments have suggested effectively scrapping Objective 2 and letting individual countries get on with the job, but the European Commission does not agree with this approach.

Mr Werres's report said: "With the budgetary pressures which enlargement brings, there is a real threat of a significant reduction in the scale of any successor to Objective 2.

"These are big issues for Britain and indeed for North Yorkshire as many areas will need support long beyond 2006."

Discussions on reforming the Common Agricultural Policy are already taking place, based on a shift away from production support towards a European model more responsive to market demands and able to deliver environmental and other public benefits.

The Country Landowners' Association warned last week that the proposed CAP reforms could cost British farmers up to £300m a year in lost subsidies, reducing payments to the majority by up to 19pc by 2012.

The CLA said it supported the principle of decoupling support from production to reward good environmental practice, foster rural development and reconnect farmers with consumers but this must be achieved in a fair way across all EU member states.

County and district councillor John Blackie of Hawes, who represents Upper Wensleydale, Swaledale and Arkengarthdale and serves on the Objective 2 programme monitoring committee at the regional Government Office in Leeds, said of the county council report: "It makes the bleakest reading for the future. It gives me the gravest concern.

"We have won special Objective 2 status for a large part of North Yorkshire. As a county council we must spare no effort in maximising our lobby for continued funding after 2006."

County Coun Herbert Tindall, vice-chairman of the North York Moors National Park Authority, thought it was too early to make any sweeping statements until the proposals were in a digestible form but said: "It is important to the national park that this funding does continue in the interests of tourism.

"We have quite a way to go yet, but anything that has to be managed costs money and needs long term funding.