COUNTY Council chiefs fear they could be forced to pay up to £2million in compensation claims to victims of alleged sex abuse following a police probe.

But today an MP and a councillor expressed concern that news of the move could prompt "chancers" to try and claim compensation they weren't entitled to.

Operation Nevada was launched last year by officers in Lancashire to look at allegations stretching back for 30 years.

More than 800 former residents and care staff from seven county council-run care homes have been interviewed by police to discover whether there is a history of institutionalised sexual abuse in Lancashire.

The investigation includes people who lived in homes which are now part of Merseyside, Greater Manchester and Blackburn with Darwen authorities -- although Lancashire County Council will have to pay for any compensation claims.

Several people have already been arrested in connection with the operation, including a former teacher from Hollins High School,Accrington, who has been charged with two counts of indecent assault, and a man from Haslingden charged with a serious sexual offence and indecent assault. A report to the county council cabinet said £2million would be put aside to deal with any claims from victims following convictions. More cash may be set aside in future years.

Hyndburn MP Greg Pope said: "Those who have suffered or have been affected deserve compensation.

"But I am concerned about the growing compensation culture -- like in America -- where everyone wants something for nothing."

And county councillor Robert Hodge, leader of the Conservatives, said: "I appreciate that this money does have to be put to one side but I am worried it will lead to people chancing their arm for money they may not really be entitled too.

"The county council needs to invest in systems which prevent people from thinking they can just claim off a local authority."

A spokesman for Lancashire County Council said: "Very few claims have been received so far in connection with Operation Nevada.

"As a result, it is far too early to say how much claims will cost the county. However, it has been deemed prudent to put £2million to one side in the event of claims being received."

The on-going investigation is one of the reasons why a percentage of each claim up to the value of £6million now has to be met by the county.

The county's excess -- or self-insurance limit -- has been raised from £4.2million by their insurance firm after the county's risks, including the pending threat of the police operation, were re-evaluated.

Last year, claims against the county, which has an annual budget of around £1.14billion, totalled £17million, including £3million to people who claimed to have suffered injury due to the poor roads.

A massive inspection of roads and pavements is under way in the county, to prioritise which areas need work. Blackburn with Darwen Council is also suffering at the hands of people suing for highways accidents.

They have increased the number of staff employed to deal with claims and use private detectives to check that claims are not fraudulent.

Operation Nevada officers are looking at cases dating back beyond the 1970s. A spokesman for Lancashire Police said the investigation was still ongoing. She said: "We are working with social services departments closely and still investigating claims." A County Hall spokesman said it was too early to say whether extra claims would lead to a rise in council tax or a reduction in services.

Other councils have found themselves facing huge compensation bills as the result of investigations, such as authorities in North Wales following the massive inquiry into child abuse in children's homes.

Nigel Evans, Welsh affairs opposition spokesman and Ribble Valley MP said: "This seems a sensible move following the events in North Wales, which showed that this is a widespread problem."