Taxpayers face a huge rise in council tax bills or crippling cuts to services to counter a Government policy that takes cash from the South and gives it to the North.

Householders face a 20 per cent rise in bills, making £1,000 council tax bills the norm, or crippling cuts to public services.

The Government action, which is named "resource equalisation", was confirmed by Local Government Minister Nick Raynsford who warned council leaders not to expect major changes to the policy.

Under the new distribution formula, West Sussex County County gets a four per cent rise in funding, significantly below the national average of six per cent.

Reaction to the news was scathing today.

West Sussex County Council spokeswoman Jane Robinson warned of an 18.5 per cent tax rise.

She said: "The effect of the final settlement, compared with the draft settlement, is that we are £1.2 million worse off.

"What we have been saying about being £30 million down and, given the fact that the county council will be looking at a 18.5 per cent increase of council tax, is that we're in a very bad position because of the reallocation of grants."

She added there was protection for the education budget for the next year but this was only temporary and the outlook was extremely concerning.

Finance officials at Worthing Borough Council have dipped into cash reserves to keep council tax demands down.

They have withdrawn hundreds of thousands of pounds to ensure their bill will go up by only 8.5 per cent from April.

Last night the council's executive heard that if they had not used reserves, the rise would have been nearer 20 per cent.

But it was only a brief respite because when the county council and Sussex Police Authority demands are added, there will be an overall increase of between 15 and 20 per cent.

Taking Worthing's portion of the bill alone, a band A taxpayer will have to find £103.02, band B £120.19, band C £137.36, band D £154.53, band E £188.87, band F £223.21, band G £257.55 and band H £309.06.

But when the county council and police authority bills are added, the average band D householder will face a bill of about £1,120.

Steven Waight, leader of the Conservative opposition on the borough council, warned reserves had gone down by more than £1 million in just two years.

Elsewhere in the county, Mid Sussex District Council leader Christine Field said: "We now have to put service improvements on hold or increase council tax to cover that loss."

Mid Sussex MP Nicholas Soames said: "What else can councils do except put up taxes? They've been denied money they need which is abidingly unfair.

"The new system is a fundamental unfairness on people across West Sussex."

East Sussex received a funding increase of only 3.8 per cent.

East Worthing and Shoreham Tory MP Tim Loughton said: "This is a blatant example of the Government transferring much-needed funds to their spendthrift, socialist chums in the North."

Councillor Peter Jones, leader of East Sussex County Council, described the news as an absolute disaster.

He said: "We are looking at about a 20 per cent rise in council tax. We will keep pressing and try and bring about changes for future years."

Coun Jones said the formula for working out the grants was chaotic and had attracted widespread criticism at Parliamentary level as well as in local government.

He said: "Well over £100 million is going from the South-East to the Midlands and the North.

"We are one of the poorest counties in England.

"Wages in Sussex are poor, on a level with Teeside and Tyneside, and house prices are high, which means there is not a high level of disposable income.

"We also have a high level of pensioners."