COUNCILS in the Merseyside area were handed £6m of government cash yesterday as a "reward" for building nearly 5,000 new homes.

But ministers immediately faced accusations that the handout disguised an overall cut in funding – and a transfer of resources from North to South.

The money was allocated from the flagship “New Homes Bonus”, designed to trigger the building of badly-needed new homes by handing a financial incentive to cash-strapped councils.

The largest sum went to Cheshire West and Chester council (£1,224,966), for building – or bringing back into use – 899 properties, followed by Sefton (£1,187,553) and Liverpool (£1,181,848).

But other authorities received much smaller amounts, including St Helens (£354,664 ), Knowsley (£317,882) and – strikingly – West Lancashire (just £44,967).

They are able to spend the cash on improving local services, such as building playgrounds or bus subsidies, or even on reducing council tax.

Grant Shapps, the housing minister, said the bonuses were breaking down local resistance to development, because local people could see "evidence of how it improved their lives".

The allocations, for 2012-13, will be repeated for the next five years. In addition, each council will receive, next April, the second instalment of their rewards for homes built in 2009 -10. But Labour was quick to point out that the New Homes Bonus was funded from the scrapping of near-£1bn annual grants for new housing. Furthermore, the scheme offers higher bonuses to councils building large, expensive homes – built, predominantly, in the South.

They receive a sum matching the amount of council tax received from that property – which means a higher sum for larger, more costly homes – although there is a £350 top-up for each affordable home.

Wealthy Westminster council, in central London, received £3.5m yesterday, more than half the sum allocated to the whole of Merseyside and North Cheshire.

Jack Dromey, Labour's housing spokesman, said: "The New Homes Bonus remains an expensive and unfair policy that will have a limited impact on housebuilding, delivering only 14,000 homes each year according to the government's own estimates. It is also unfair, redistributing money from more deprived to less deprived parts of the country."