Vital defences in a town ravaged by floods two years ago could be delayed because of a funding squeeze.

Work on a major flood defence scheme in Lewes is due to begin next year.

However, the £6 million project, already a year behind schedule, is at risk because a review of the way government grants are distributed has left councils facing a cash shortfall.

East Sussex county councillor Roger Thomas said the changes could cost his authority, one of the councils which would help fund the work, more than £26 million next year.

Coun Thomas, who sits on the Sussex Local Flood Defence Committee, said: "At the moment I am really concerned we won't get enough money to do anything on it.

"Quite frankly, if the work doesn't start next year, I think the people would have been let down."

The Environment Agency wants the committee's member councils - East and West Sussex county councils and Brighton and Hove City Council - to increase the amount they spend on flood defence by about £1 million next year.

None of the three authorities is likely to be able to afford the rise. They have already asked the agency to produce lower estimates before next year's £12 million budget is set.

Peter Midgley, the agency's Sussex area manager, said: "We are certainly not over-optimistic about the amount we will get but at the moment it is too early to tell what effect that will have on Lewes."

The Lewes scheme, which is also intended to protect Uckfield and outlying areas in the Ouse valley from a repeat of the October 2000 disaster, has been criticised as inadequate by some groups.

Parts of Lewes would get less protection than others, while the work would not stop Uckfield from being inundated if there was the same level of rainfall as occurred two years ago.

Leslie Goode, of the pressure group Lewes Flood Action, said: "We have reservations about what is on the table but we want it to go ahead quickly as it is a matter of absolute urgency."