Council tenants in parts of Sussex are subsidising local authority housing in Brighton and Hove, it emerged today.

The disclosure comes in an Audit Commission report branding the subsidy system unfair and urging the Government to abolish it.

The scheme forces 82 per cent of councils that own housing stock to prop up the loss-making minority.

It means council tenants in the city are having their rent subsidised by £2 a week each. Eastbourne tenants also get the subsidy.

The money comes from council tenants in other local authority areas across the country, including other areas of Sussex.

Tenants pay £29 a week in subsidies in Crawley, £12 in Adur, £11 in Lewes and Arun and £9 in Wealden.

The biggest winners from the cross-subsidy scheme are council tenants in London, who have their rent subsidised by an average of £15 a week.

The Audit Commission is calling for the system to be scrapped to enable profitable councils to keep the money for their own uses.

Under the current scheme, which has been in place for 17 years, subsidies are determined by central Government according to estimates of their income and expenditure needs.

Because councils in London and the North-West have disproportionately high levels of debt to finance, 82 per cent of councils get "negative subsidy".

The report states: "Instead of receiving subsidy, councils provide money out of locally raised income to the Government for redistribution.

"This requires councils to charge higher rents than is necessary to meet the current costs of their own service provision and stock investment, as determined by the Government's calculations."

Councils with high levels of debt and operating costs are more likely to receive subsidies to balance their accounts.

The report, Financing Council Housing, found the system did not encourage efficiency of high performance and recommends it is abolished.