directors of a taxi service for the disabled say it will have to cease operating because of new licensing laws.

Charles Smith, finance director of Darlington Dial a Ride, received a letter from Darlington Borough Council on Friday which said the service's vehicles must be licensed or withdrawn immediately.

Mr Smith said directors first spoke to the council about the matter in June last year, but had been told by the Community Transport Association (CAT) it is exempt from the rules.

Directors met council officials again last week and were under the impression there would be further discussions before a decision was made, but the letter arrived "out of the blue".

The Darlington Dial a Ride service, a registered charity, was established more than ten years ago. About 900 elderly and disabled passengers a month using its fleet of five vehicles.

Mr Smith said the cost of licensing the service's fleet and 20 volunteer drivers could cost up to £5,000 a year, which the service could not afford.

Dial a Ride chairwoman Rosemary Sandford said: "I react to this news with great shock and sadness after over ten years of service to the town.

"We did pioneer accessible transport in this town, and our greatest concern is going to be the impact on our passengers."

Councillor Heather Scott, deputy leader of the Conservative group on the council, said: "This as absolutely disgraceful. I'm concerned for the people on Monday morning expecting Dial a Ride to pick them up, and that a charity organisation is being treated like this by the local authority."

A spokesman for the council, which gives the service a £32,000 annual grant, said the rules would apply only to Dial a Ride's two smaller cars and not the three larger vehicles it owns.

He said: "It's a public safety matter. They have vehicles like normal taxis, and taxis have to be licensed. Under that licence they are subject to strict checks - it's as simple as that.

"We met with Dial a Ride over a year ago because they said they thought they were exempt, and we've given them all that time to tell us why they thought that.

"They haven't given us any proof.