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Last Updated: Wednesday, 13 February 2008, 13:39 GMT
'Wrong' Newcastle in 2m mix-up
Newcastle's Tyne Bridge and a street in Newcastle-under-Lyme

The government has overpaid a council by 2m after it got the wrong Newcastle.

The money, a reward for promoting local firms, was given to Newcastle Borough Council in Staffordshire instead of Newcastle upon Tyne City Council.

The borough council was given more than 2.5m instead of just 600,000 and has been asked to repay the difference.

The Department for Communities and Local Government has described the situation as a "regrettable error".

I think it's extraordinary and shocking
Councillor Simon Tagg, leader of Newcastle Borough Council

Councillor Simon Tagg, leader of the borough council, told BBC News that he was "flabbergasted" at the oversight.

"I am shocked that this has actually happened, that the government has got the two Newcastles mixed up" he said.

"I think it's extraordinary and shocking. I'm flabbergasted."

The money is part of a local authority business growth incentive which started in 2005.

Councils are given back some business tax that local firms pay, in return for promoting them.

The government awarded 126m to more than 270 councils in England in 2005.

Good faith

But in February 2006, the borough council received an extra 300,000 and then 1.7m a year later.

However, Mr Tagg said the first the council knew about the error was when, in a letter last week, the government asked to discuss repayment methods.

He added that the money was taken in good faith and "ringfenced" and therefore has not been spent.

Newcastle upon Tyne City Council said because the funding for the incentive is so complex, it only realised it was missing at the start of this year.

A spokesman said the council was pleased the "administrative error" was spotted and maintained none of its services were affected and it had now received the full amount it was owed.

In a statement, the Department for Communities and Local Government said: "This is a regrettable error and we have taken action to rectify it.

"We are working closely with the councils involved, and are taking steps to ensure this does not happen again."

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