Councillors are furious that Rushmoor has been given £1.1million less in grant money than its three neighbouring Surrey district councils, and at the lack government interest in their concerns.

Residents across the borough are angry at the 16% increase in their council tax, which the councillors say was necessary to make up the shortfall in funding.

Now Rushmoor Council says it has had enough and will challenge the government’s policy through a judicial review, which could see the average council tax bill reduced by about £36.

This could see the Office of the Deputy Prime Minister having to explain its calculations and the difference between Rushmoor’s grant and the amount its Surrey equivalents expect to get.

Rushmoor chief executive Andrew Lloyd said last week: “When we looked at our grant the government had indicated their intentions to get rid of some of the discrepancies in the amounts neighbouring authorities got. But we can’t see any justification for the amount we get here and those on the other sides of our border.

“We think we are being significantly underfunded and if we were treated fairly and consistently then we could potentially get an extra £1.1m on our grant which would obviously be to the benefit of people in Rushmoor and take pressure off their council tax.”

The cost of taking action against the government will be at least £20,000, which will be funded from savings the council made last year.

Councillors say the action will not affect their current spending programme and that the cost is small in comparison to the potential gain.

Mr Lloyd said the council would be taking every precaution to ensure the review would be a success.

He said: “There will first be a case conference with our counsel in London just to be sure it will be beneficial to pursue this course of action.

“We have already taken advice and we have looked at it very comprehensively and I believe, particularly around the issue of consultation, that we have a strong case.

“We have tried to have a dialogue with the government about this but they have not been willing to do that.

“They did not want to receive a deputation from the council and they have not answered any of our letters.”

He added: “The intention really is to use this as a means to put the government under pressure to review their policy and look at the way they have treated Rushmoor.”

Councils across the south have seen their grants slashed. Opposition groups claim extra cash has been sent to poorer authorities in the north.

But Rushmoor is in a unique position because its grant is so much less than most of its neighbours, which the council argues is unjustified. Local authorities in the south-east receive grant money to compensate them for extra costs which they incur because of their location.

In the past the government used broad geographical areas for their calculations but this created problems of severe “cliff-edges” between neighbouring authorities.

A recent revision of the grant system was designed to reduce the differences between the grants received by neighbouring authorities.

However, the difference between Rushmoor and its neighbours is still 9.9% — a funding gap of £1.1m.

If Rushmoor were able to negotiate with the government to get at least some of this money back, it could mean a reduction in council tax or an increase in services.

Council representatives met with the Government Office of the South East last week and are to discuss the matter with an officer from the Office of the Deputy Prime Minister.

It is hoped that meeting, to take place next week, could lead to negotiations over Rushmoor’s grant.