A NEW body is desperately needed to help defuse racial tensions in North Staffordshire and improve community relations, according to anxious MPs.

The comments come just days after it emerged that the area's race equality council has been forced to shut down after getting into financial difficulties.

The North Staffordshire Racial Equality Council (REC) has made its nine staff redundant and is expected to call in administrators today.

A recent audit by Stoke-on-Trent City Council uncovered huge debts.

The charity received £1 million-a-year of taxpayers' money, but it is unknown how much the independent voluntary organisation owes creditors.

MP for Stoke-on-Trent North Joan Walley said she was shocked to hear of the closure.

She said: "I think the most important thing is that we look at what has happened to see why it has come to this.

"But if the REC cannot continue in its present form then we also need to work with the voluntary sector to see what scope there is for a new single inequality council to be created for Stoke-on-Trent."

Fellow MP Rob Flello, who represents Stoke-on-Trent South, said he feared the REC's demise would be exploited by far-right political groups such as the BNP.

He said: "In a period of our history where more than ever we need organisations that are addressing areas of inequality it is terrible to lose this service.

"It is also a great shame for the staff and all those involved with the organisation.

"It is sad in our own city, to see that inequality is being used by some groups for political gain."

He added: "There is certainly a need for another organisation to deal with inequality."

Former elected mayor of Stoke-on-Trent Mike Wolfe, who was a chairman of the REC during the early 1990s, said he was stunned to hear of the group's collapse.

He also called for urgent action to set up a replacement for the organisation to help protect the rights of minority groups in North Staffordshire.

He said: "If Stoke-on-Trent is to remain a leading multi-cultural city it is essential that it has a successful and thriving racial equality council which can address problems that arise from communities getting on with each other."

He added: "I think it is vial that the city council acts to help set up another organisation as a matter of urgency."

The REC had a budget of more than £1 million a year, made up largely of grants from the Government, local councils and other organisations including Staffordshire Police.

But the Charity Commission, which regulates the voluntary sector, said it had not received any accounting figures from the REC since February 2006.

The closure of the REC will not affect initiatives such as the Game On intervention programme in schools or the PARINS support group for recording and tackling racial incidents.