By John Andrew BBC local government correspondent

Surrey is the richest county in England.

The average income is more than �33,000 a year - swelled by high-earning City workers and millionaire rock stars.

But this is something Surrey County Council is sick of hearing.

Its Conservative leader Nick Skellet says: "There is a perception everyone in Surrey is wealthy.

"There is relative private affluence.

I am sure our children will be losing out in Surrey

Carol Rusby

"But there is public service impoverishment too."

The county receives the lowest level of government grant per head of any authority in the country but faces the highest costs outside London.

And it is struggling to provide the level of care and protection it would like for the elderly and vulnerable children.

Care home places are expensive and in short supply.

On average there are 150 people in Surrey unable to leave hospital because there is no care place for them.

And soon, like all councils, Surrey will be fined by its health service if it does not do more to reduce bed-blocking.

Even before the change in grant formula, Surrey says its needs are unrecognised.

For vulnerable children, the current formula assesses Surrey's spending needs at �95 a head.

Nearby Croydon's is put at �235.

Surrey's finance director Mike Taylor says: "Ministers do not seem to recognise the incidence of disability in children, for instance, is the same across the country.

It is looking more grim than any year I can remember

Mike Taylor Surrey County Council

"It does not vary with ethnicity or housing density."

Though its schools are among the best in the country, Surrey is struggling to recruit and retain teachers - especially in those areas which border Greater London.

Just by moving to a school down the road teachers can pick up an extra �1,500 in London weighting allowance.

At Esher High School they are lucky.

They have a full complement of teachers - all of them specialists.

But headteacher Simon Morris knows they may be hard to keep.

"If they moved to the Midlands or north they would be owning their own house.

"In Surrey there is every chance, especially for newly-qualified teachers, they would be living in a one-bedroom rented flat earning the same amount of money with a token recognition of the extra cost of living of only �792."

So desperate is the shortage of affordable housing for teachers that Surrey has been asking schools if they have any spare land that can be used to build teacher accommodation.

Now, on top of all these pressures, comes the prospect of a new grant formula that may divert cash to the north and Midlands.

If the government believes there is a North-South issue, they should fund that through national taxation not increase council taxes in the South in order to fund the North

Surrey county council leader Nick Skellet

That is worrying parent Carol Rusby.

"I am very concerned.

"Children in all parts of the country need the same basic education.

"They need books.

"They need teachers.

"They need their schools heated, lit and maintained.

"So I am sure our children will be losing out in Surrey."

The government has denied any agenda to shift resources from one part of the country to another and has guaranteed no authority will receive less grant than this year.

But in Surrey a cash freeze alone would have a marked effect.

Because of inflation and other pressures the council believes it may be faced with a shortfall of �60m and would need a council tax rise of 20% to fill it.

Mr Taylor says they are being expected to increase spending with less money.

Double whammy

Chancellor Gordon Brown is expecting big spending increases on education and social services.

But deputy prime minister John Prescott is changing the funding formula in a way that could harm counties in the South East.

"We have a double whammy on Surrey taxpayers - an increase in investment and a loss of grant, which will lead to big council tax increases.

"It is looking more grim than any year I can remember."

Surrey has clubbed together with other counties, including Kent and Hampshire, to form a Save The South East campaign.

Mr Skellett says: "The government is seeking to rebalance what they see as a North-South divide through raising council tax in the South with no betterment of services.

"If the government believes there is a North-South issue, they should fund that through national taxation not increase council taxes in the South in order to fund the North."