Fostering and adoption groups have warned councils to remove discriminatory policies against kinship carers or face legal action.

Solicitors firm Ridley and Hall has already targeted Kirklees, Leeds, Bradford, Bolton, Hampshire, Surrey and Peterborough councils after a series of calls from kinship carers.

The move follows the landmark ruling in September 2001 that Manchester Council had to pay all foster carers according to the needs of the child for whom they were caring. Mr Justice Munby said discriminating against kinship carers contravened the European Convention on Human Rights.

After several legal challenges to its policy, Kirklees agreed in April to pay kinship carers a higher fostering allowance, backdated to the 2001 judgement. They also agreed to pay a sum equivalent to the long-term fee to all carers who care for a child aged eight or above.

The Fostering Network welcomed the news, saying no carer should be out of pocket as a result of looking after children. "We encourage local authorities to remove discriminatory policies against family and friend carers," a spokesperson said. "Where they do not, they open themselves up to judicial review."

Baaf Adoption and Fostering chief executive Felicity Collier said the lack of proper financial support for kinship carers was an important reason why only 17 per cent of children in care were fostered by relatives, compared with 26 per cent in the rest of Europe and the US.

"We all know that, on balance, children do better living with people they know if they can provide safe care," Collier said. "Government policy does not make sense."

Ridley and Hall senior partner Nigel Priestley estimated that Kirklees should be paying a minimum £800,000 to some 40 carers. But he added that the council's revised policy "did not go far enough".

He said: "In the Manchester case, compensation was paid for the months and years leading up to the date of the judgement. Kirklees appears to be trying to short-change carers to accept fewer backpayments than they are entitled to in law."

A council spokesperson said the money would be raised through council tax rises and "was not coming from other departments".