FUNDING to Worcester City Council is plunging a shock 35 per cent - with the Government dealing it a serious blow.

Your Worcester News can reveal how the Treasury has decided to wield the axe, with the city's main Revenue Support Grant (RSG) tumbling from £1.8 million to a record low of just £1.2 million.

That main funding pot will also reduce to zero by 2019, one year earlier than planned, under Chancellor George Osborne's plan to let councils keep all of their business rates instead.

Between now and then the city council has been offered a definitive four-year offer which effectively leaves it £1.5 million worse off than expected, with the RSG tumbling to £650,000 in 2017 and just £310,000 in 2018.

The offer has led to finance chiefs having to tear up their forecasts, with a hunt due to start for new ways to make savings.

The Conservative leadership has decided to raid a separate funding pot called the New Homes Bonus to plug the gaps, saying it means no new cuts will be required over the next three years.

It has also pointed to optimism around the future, with record investments going into big capital proejcts and the city's economy continuing to grow.

But opposition Labour councillors have severely criticised the Government, accusing it of "moving the goalposts".

Tory Councillor Chris Mitchell, the cabinet member for finance, said: "We have a growing economy and it's our intention to stimulate more local economic growth."

He pointed to the next three years being safe from any cuts and this year’s forthcoming record £11 million spend on big capital projects, which includes the new eight-lane swimming pool at Perdiswell, improvements to Gheluvelt Park and new resurfacing in the city centre.

Speaking during a cabinet meeting last night, the deputy leader Councillor Marc Bayliss called the situation "challenging" but said despite the reductions the finances were good shape.

"I would describe it as challenging but very deliverable, we retain a strong financial position which gives us a three-year period of grace," he said.

Councillor Simon Geraghty, the leader, said: "Frankly, to be in a scenario where we have a balanced budget for three successive years and money in the pot, I can tell you there are very few councils in the country in that position.

"Many others are looking at much larger savings plans - we're here because we've made some very prudent decisions, against some resistance."

But the funding offer has even led to Labour politicians saying they have some sympathy with the leadership.

Labour finance spokesman Councillor Richard Boorn said: "Using that New Homes Bonus means they'll have less to spend in other areas, in place shaping.

"What we're saying to the people of Worcester is 'pay more in council tax and you'll get less'.

"It's not a good settlement and it gives us all sorts of issues, it makes Wonga look a better bet than dealing with the Government, they move the goalposts time and time again.

“Is this because Worcester City Council has done a bad job?

"Far from it, the city just like every other council has done a fantastic job in dealing with the pressures from reducing budgets - it’s the Government that has failed us.”

He added that he had “sympathy” with the administration but said the budget plans have “left a hole that hasn’t been addressed”.

"I didn't expect the settlement to be this bad, it's not a good situation," he added.

Among the cuts in Government support is the New Homes Bonus, which city finance chiefs say they expect to reduce by a total of £2.3 million by 2020/21, to £8.7 million over the next five financial years rather than £11.1 million.

The Chancellor wants to completely overhaul local government funding by then, with all the taxes raised from businesses being retained by councils, rather than just half.

That policy will effectively reward those areas which are able to successfully stimulate economic growth.

The city council's £10.1 million budget for 2016/17, alongside £11 million in capital spending and a two per cent council tax rise, is being voted on next month.

The council can only take up the definitive four-year funding deal from central Government if it produces what the Treasury calls an "efficiency plan".

Whitehall officials are trying to encourage councils around the country to accept the new-four year options by saying the sums are guaranteed.

At the moment local authorities sit on a knife-edge every December waiting for the yearly handouts.

* See last night's cabinet report spelling out the tumbling Government funding HERE.

* Record £11m investment in big capital projects around Worcester - see our special report on that HERE.