COUNCILS already reeling from savage budget cuts have been landed with massive bills as part of a complex shake-up in housing finance – and given just a year to pay up.

The shock move, which effectively ends hopes of any new council housing for years, means some cashstrapped North-East authorities face the prospect of taking out loans for tens of millions of pounds. One of the hardest-hit councils will be Darlington, which must raise £27m at the same time as cutting its budget by £22m.

The authority is expected to take out a Treasury loan to cover the payment, which has been demanded as part of a change in council house financing.

Councillor Bill Dixon, the council’s spokesman for neighbourhood services, said the proposals would stop authorities from being able to build social housing in the foreseeable future.

He said Darlington would need to recalculate its figures to enable it to work out when it will be able to start building homes again.

“It is probable we will carry so much debt we won’t want to take on any more. They seem to be putting every obstacle in our way to stop us from housing people.”

The town’s Labour MP, Jenny Chapman, accused the Government of “raiding local council coffers”.

Ministers insisted the changes would put councils and communities in control, by freeing them from annual payments into a central pot, called the housing revenue account (HRA) subsidy system.

But The Northern Echo can reveal that Darlington’s outlay was only £1.5m this year – suggesting it could be 18 years before the council emerges as a “winner” from the shake-up.

Other authorities hit with big bills, include County Durham (£9.4m), South Tyneside (£47.3m), Harrogate (£64m) and Richmondshire (£20.7m).

Furthermore, a promise that the scrapping of the HRA would deliver new financial muscle to allow town halls to build more council houses – and tackle long waiting lists for homes – has been dumped.

From April 2012, local authorities will retain rents from their council homes, instead of handing the receipts to the Treasury for redistribution under the HRA formula.

But, crucially, Labour’s plans to allow councils to use those assets to borrow cash for major building programmes have been quietly abandoned – raising questions about the benefits of the switch.

Darlington, which is already planning hundreds of redundancies, a cut in libraries and higher charges for some services as a result of the spending reductions, has been hit with the £27m bill because the Department for Communities and Local Government (DCLG) has decided its historic council house debt has been underestimated.

As a “low debt” council, it subsidised “high debt” councils – including Newcastle and Gateshead – in the HRA system, set up two decades ago.

Officials have now calculated the overall value of each authority’s housing stock and decided to equalise the £21bn of debt within the HRA, in line with those valuations.

They decided Darlington’s council houses are worth £60m, but the town’s current debt is only £32.7m – requiring the £27.3m top-up payment.

Council chiefs can apply to the Treasury’s Public Works Loan Board, which charges interest at one per cent above the rate for Government bonds – 3.7 per cent yesterday – and lends money for up to 50 years.

However, a DCLG spokesman said: “They could go to banks if they think they can get better rates and they may have reserves, or savings.

All payments will need to be made by the end of March 2012.”

David Siddle, strategic housing manager at Durham County Council, said: “The council has been expecting an announcement from the Government permitting us to keep all the rent we collect from our housing rather than giving some of it to the Treasury.

We always knew there would be a price to pay. We need to take time to consider the real implications.”

Alison Seabeck, Labour’s housing spokeswoman, said the net payment to the Government would be nearly £2bn more than expected. She said: “Local councils will be rightly disappointed that this Toryled Government has chosen to saddle them with extra debt.”

Even “winners” from the shake-up – including Newcastle (£332.7m) and Gateshead (£42.4m) – will pay off debts now deemed to be too large.

Meanwhile, more than 100,000 families across the region are on growing waiting lists for a council or housing association home.