LIVERPOOL Council is to lose millions of pounds a year after the government last night announced it will proceed with the most radical shake-up of town hall finances for 20 years.

The city council raised the alarm over plans for local councils to retain future business rate growth to spend on local services – instead of handing cash to the Treasury, for redistribution from a central pot.

St Helens MP Shaun Woodward warned it would “cripple” his town and accused the government of trying to hide the bad news amid the latest resignations on phone hacking.

Merseyside authorities received a “top-up” of £325m from the existing system in the current financial year – including £112.61m handed to Liverpool, from richer areas.

In stark contrast, three of the region’s richer authorities – Cheshire West and Chester, Warrington and West Lancashire – were “losers” to the tune of £129m, official figures show.

The shake-up will not touch existing allocations – the figures in 2012-13 will be used to fix a new baseline, from April 2013 – but rates from new businesses will then be retained by councils.

Communities Secretary Eric Pickles said his “local government resource review” would end councils’ “dependence on government handouts and finally start rewarding economic growth”.

But Paul Brant, the city council’s deputy leader, said: “Liverpool will be badly affected by this. It will disadvantage the North and areas of the South will gain.

“It will help areas that have a lot of churning of new business start-ups – which tend to be in the South – rather than areas that have large, static employers.”