CHESHIRE County Council's worst fears have been confirmed with the Government's announcement of its revenue support grant.

The grant, which is the council's major source of revenue funding, has been set at £406.8million.

Although this is up £23.1million on last year, the council says the six per cent rise will still leave it with a significant funding gap.

It says £16.3million of the new total has to be sent directly to the education service, leaving just two per cent for the rest of the county's services.

Finance executive member Gretta Cousins said the announcement proved they were right to send out an early warning about the funding gap.

She said: "We must now look at the figures in detail to judge more precisely what they will mean against the background of budget pressures from service growth - particularly in social services."

The authority will have to meet costs including:

l Government requirements to increase education funding.

l The demand for services from an increasing population of older people.

l New legislative responsibilities in trading standards.

l The rising cost of providing for adults with special needs, residential and nursing care.

Clr Cousins added: "All this, of course, is against the background of the recent Government revelation that we will have to pay back £1.2million as a result of its faulty calculation of census population figures - money we can ill afford to lose.

"This award will leave us facing some very tough choices indeed."

However, the council's Labour leader, Clr Derek Bateman, said the grant was an early Christmas present from Chancellor Gordon Brown.

He said the rise was 0.4 per cent higher than the average local authority award, and there was an extra £1.7million for older people in the county.

Clr Bateman said: "I think this is something of an early Christmas box for all our Council Tax payers."