The contract affects 40 PMS practices covering 288,000 patients - 90 per cent of the local population.
The GPs in the area had no choice because the PCT was preparing to bring in private providers, said Northumberland LMC secretary Dr Jane Lothian.
GPs were close to agreeing a deal last month in which more income could be raised by moving £1.4 million of hospital services into practices.
But instead, practice budget cuts have been capped at 3 per cent for the first year and 6 per cent for the second.
Budgets in the area will also be affected by the national access drive, said Dr Lothian.
'We are due one Darzi clinic,' she said. 'It's ludicrous after they've spent the last year cutting our budget. The extra funding is scarcely enough.'
Chris Reed, chief executive of Northumberland Care Trust, said: 'We acknowledge that these funding discussions have not been popular with the GPs or with many local people, but as a public body we have a responsibility to demonstrate that we are making the best possible use of taxpayers' money.'
Northumberland, alongside Suffolk, is thought by the GPC to be a test-bed for budget cuts to PMS budgets nationwide.
Dr Julie Johnston, chairwoman of the PMS negotiators in Northumberland, said small rural practices and some large urban practices are anxious about their long term viability.
'Unfortunately, the redundancies of a number of front line clinical staff are unavoidable as a result of these funding cuts,' she said.
PMS Time Line
March 2007: DoH suggests axing PMS contracts that are not cost-effective.
December 2007: PMS GPs face budget cuts of up to 25 per cent.
January 2008: Practices offered an MPIG to revert back to GMS. LMC announces a breakthrough deal with Northumberland Care Trust.
March 2008: GPs agree to new contract amid threats of private providers being used.
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