Crucial flood defence schemes throughout Sussex could be shelved for a year or more in a cash wrangle with councils.

The Environment Agency will get £500,000 less than what it said was the minimum needed for work on defences next year.

Major projects in the Ouse and Cuckmere valleys - the scene of devastating flooding in autumn 2000 - are almost certain to be delayed.

Urgently needed coastal defence work between Shoreham and Lancing is likely to be hit and the half-completed flood relief scheme on the River Lavant at Chichester is expected to be finished a year later than planned.

Several smaller projects on rivers and on the coast could also be put on hold.

The decision means the three main Sussex councils have paid less than the agency wanted for flood and coastal defence for seven years in succession.

The continued underfunding represents an accumulated underspend of some £2 million.

The agency wanted East and West Sussex County Councils and Brighton and Hove City Council to increase their share of the flood defence bill by 14 per cent.

The three councils agreed a nine per cent increase, insisting money spent on major work should not fall below £9.9 million, the minimum needed to secure the highest level of Government grants.

Peter Midgley, the agency's Sussex area manager, said: "It means we will not be able to do all the maintenance and construction we feel is required.

"The work will slip backwards into the programme and that simply increases our vulnerability if we get bad weather."

He said a delay to work in the Ouse and Cuckmere valley was an "inevitable consequence" of the decision.

Flood alleviation on the Ouse, the worst hit river catchment in England and Wales last autumn, was scheduled to start in the 2003/04 financial year but could now be put back by one or two years.

Leslie Goode, of Lewes Flood Action, said insurance companies could start refusing flood cover for homes and businesses in the town and surrounding area in 12 months if nothing was done to reduce the risk from flooding.

He said: "I think people ought to be really concerned about this. This is not the time to be preaching about financial restraint. In the face of what happened last October I think they ought to be reasonable.

"We could end up in Lewes with 800 uninsurable properties."

West Sussex wanted to pay the full amount but its poorer partner authorities on the Sussex Local Flood Defence Committee insisted on the lower figure.

East Sussex's representative, Mike Murphy, said it would be difficult for his authority to find the money it pledged to hand over.

He said: "I think we are being very responsible in agreeing nine per cent. As far as I am aware we are actually exceeding what we can reasonably do.

"We are asking the agency to look at its priorities now and we feel it has enough money to do that."

East Sussex has historically attracted less help for flood defence than other councils.

The county was identified as having one of the worst records for attracting aid in the then agency chief Sir John Harman's report on the lessons learned from last autumn's flooding.

Despite the downpours of last year, the agency said coastal flood defences remained the most pressing problem, one expected to become more acute because of climate change.

West Sussex representative Mark Dunn said the existing funding system was not meeting the needs of the people of Sussex and should be reformed.