A judicial review sought by Hillingdon Council, Liverpool City Council, Leeds City Council and Norfolk County Council over increased court fees for public law childcare applications and placement order applications was dismissed by the High Court last week.
The councils said that from May 2008, local authorities have had to cope with a 2,500 per cent increase in court costs for judicial care proceedings, which is when the government transferred the costs to councils.
Councillor Stewart Golton, executive member responsible for children's services at Leeds City Council, said: "This disappointing result could have far-reaching financial implications for children's services in Leeds. As a direct result of the new fees, we now face a shortfall of some £540,000 this year."
Councillor Ray Puddifoot, leader of Hillingdon Council, said the decision meant authorities would have to look at other areas to make savings.
"This issue could put funding for other children's services at risk," he said. "By not putting in place a fair system for local authorities to meet these costs, some councils will be out of pocket and the extra costs will ultimately be met by local tax payers."
Meanwhile, the NSPCC has vowed to monitor the number of care proceeding applications, after fears they will plummet following the ruling.
Wes Cuell, acting chief executive of the NSPCC, said that shelling out for the full cost of a placement meant there is a risk that authorities may consider options other than starting care proceedings.
"We're aware that there has already been a drop in the number of care proceedings initiated by local authorities. It can't be a coincidence that it came the same time as these changes," he said.
But Clive Grimshaw, policy consultant at the Local Government Association, said: "I can see why councils are concerned but if you've got a well-trained workforce, I think it's patronising to say they wouldn't pursue the case because of costs."
