An adviser to MPs has warned that county councils could lose millions of pounds a year under proposals to change the way government grants are allocated.

Rita Hale, an accountant and director of consultancy Rita Hale & Associates, said all three options proposed in the government's consultation paper for reforming the way the standard spending assessment is calculated would involve cutting revenue-spending grants in almost every county council.

At the same time, all 12 inner London boroughs would gain from two of the three options, with three quarters benefiting from the third option, she said.

Hale, who advises the House of Commons select committee on local government finance, was speaking last week to members of the Local Government Association. They were attending a conference on the local government finance formula grant distribution.

Meanwhile, in a review of fostering costs within the wider review of local government funding, the consultation document proposes an option of giving councils with high levels of deprivation and large ethnic minority populations more money to cover the costs of foster caring.

The proposal aims to reflect the extra resources needed to recruit and retain foster carers in some areas.

Henry Rogers, who headed the Department of Health's social services spending review, said there was evidence to suggest that social class and ethnicity were good indicators of increased foster care costs.

"It could be that low earning people are more prepared to become foster carers, and maybe people from ethnic minority backgrounds are more difficult to place," he said.

- Local Government Finance Formula Grant Distribution consultation paper from www.local.dtlr.gov.uk/review/consult/index.htm - consultation ends 30 September.