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 of government interest in their concerns.
Residents are angry at a 16% council tax increase which councillors say was needed to make up the funding shortfall.
Rushmoor Council will challenge the policy through a judicial review which could cut average council tax bills by £36.
This could force the Office of the Deputy Prime Minister to explain its calculations and the difference between Rushmoor’s grant and those its Surrey equivalents expect.
Rushmoor chief executive Andrew Lloyd said: “The government had indicated their intentions to get rid of some of the discrepancies in the amounts neighbouring authorities got.
“But we have looked carefully at that and can’t see any justification for the amount we get here and those on the other side 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, to be funded from council savings last year.
Councillors say the action will not affect this year’s spending and the cost is small compared to the potential gain.
Mr Lloyd said the council would take precautions to ensure the review’s success.
“There will first be a case conference with our counsel in London just to be absolutely sure it will be beneficial to pursue this course of action.
“We have already taken counsel 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.
“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.
Southern councils get some extra grants to pay for costs, including higher wages, caused by their location.
In the past the government used broad geographical areas for its calculations but this caused ‘cliff edges’ between neighbouring authorities.
Recent revisions aimed to even up grants but the difference between Rushmoor and its neighbours is still 9.9% — a funding gap of £1.1m.
If Rushmoor could negoti-ate with the government to get at least some of this money back it could mean a council tax cut or a services increase.
Council and Government Office for the South-East representatives met last week and will now discuss the matter with an officer from the Office of the Deputy Prime Minister.
It is hoped that meeting, which will take place next week, could lead to negotiations over Rushmoor’s grant.