A group of 23 local authorities, including ten London boroughs, have lodged a claim for a judicial review in the high court.
In the past, the Department for Education (DfE) used money from its central resources budget to help academies run the equivalent of services that councils supply for maintained schools, such as extra support for pupils with behavioural problems.
But CYP Now revealed earlier this year that government planned to start financing support services in academies by cutting the "formula grant" it gives to local authorities – by £148m in 2011/12 and a proposed £265m in 2012/13.
At the time the government claimed that the old method of calculating financial support for academies equated to "double funding" schools and would be unsustainable given the expansion of the academies programme.
But the 23 councils argue that the cash being taken away from them vastly exceeds the amount they will save through no longer having to provide support to academies in their area.
This is because the cost-saving of not having to provide support services to schools that convert to academies is marginal, since the economy of scale that is gained through buying in bulk is lost.
In their application for judicial review, the local authorities also warn that the £148m cut breaks the government’s own so-called "new burdens rules", which state that central government is responsible for funding the cost of any policy that has an impact on councils.
The judicial review claim names Communities Secretary Eric Pickles as the primary defendant in the case but Education Secretary Michael Gove is also listed as an interested party since his department is responsible for academies policy.
Bevan Brittan, the solicitors who represented the group of councils that challenged government over the scrapping of the Building Schools for the Future programme, are representing the 23 local authorities.
A government spokesman said: "The DfE and Department of Communities and Local Government are aware of the proposed judicial review. We will respond in due course."
Matt Dunkley, president of the Association of Directors of Children’s Services (ADCS), said the £148m academies cut compounds existing financial difficulties facing local authorities, caused by the wider front-loading of cuts to council budgets this year.
"The loss of funding is impacting on all local authorities regardless of the number of academies in the local area," he explained.
"ADCS will be responding to the consultation [on academies funding for 2012/13] and pressing hard for a more equitable longer term funding arrangement that does not give a financial incentive to those schools that wish to convert to academies, nor deny local authorities the resources they require to be an effective champion for children in their area."
