Council chiefs have agreed to award a quarter of a million pounds annually to a regeneration organisation.

New rules dictate that so-called ‘Local Enterprise Partnerships’ have to become “incorporated bodies”, forcing councils across the UK to take responsibility for them from April 1.

Without LEPs cash-strapped authorities like Cumbria County Council are unable to attract the funding needed for economy-boosting projects.

One of 38 LEPs in England, the Cumbrian organisation oversees 17 deals designed to generate jobs and economic growth, with more than £60m of government funding invested in the county up to 2021.

Speaking at a cabinet meeting, council leader Stewart Young said he did not agree with the incorporation idea.

But he also admitted that the county could not do without the LEP because they have become the “Government’s chosen vehicle for economic development”.

He said: “The county council is assuming quite a high level of risk by becoming an accountable body. Funding flows through us and if [LEP] programmes fail to meet targets that money could potentially be clawed back. It is not something we take lightly.”

Under the agreement, the county council will receive an annual management fee of £150,000 from Cumbria LEP as a partial recovery for the costs of becoming the accountable body.

The in-kind contribution from the council will be around £250,000.

The county council will also release £336,000 of revenue from Cumbria Infrastructure Funding to allow the LEP to act as a “growing concern” when it is formally incorporated, as well as to provide an “extraordinary expenditure” to cope with issues including staff redundancies.

The LEP is now based at Redhills near Penrith but under the new arrangements it will be leased to them by the council for a peppercorn rent.

However, the LEP will carry out some day-to-day management and support services in the building in lieu of a cash contribution.

Coun Young added: “LEPs have a shoe-string budget. If we were to ask the LEP for the full cost of the rent they couldn’t afford it.

“They are the Government’s chosen vehicle for economic development and if we don’t have an LEP we won’t get the funding. There are some risks but it is right that we should have a key role. It’s a priority for us and if we want the strength of the Cumbrian economy to continue we have to ask for a contribution, but accept we are not going to get all of our costs (back).

David Southward, cabinet member with responsibility for economic development and property, said he was feeling “optimistic” about the LEP’s future following a series of high-profile appointments to the board.

“Now it’s time for the Government to put its money where its mouth is,” he said.