The Government has ordered a review after being forced to admit a second mistake in as many months in the way it calculates council payments.

Local government secretary Sajid Javid said he would not seek to clawback £36m of over-payments in 2018/19 after officials uncovered an ‘historical error’ in the methodology used to calculate the sums paid to business rate pilot areas.

The mistake comes weeks after a major miscalculation in the recent local government finance settlement.

As a result of the latest error in the sums used to adjust tariffs and top-ups, over-payments were made to 27 local authorities and the Greater London Authority.

A written parliamentary statement by Mr Javid read: ‘These local authorities will have been operating on the understanding that this funding has already been secured and, at this this late stage in the year, a sudden reduction in their funding could potentially have an impact on the delivery of the objectives agreed as part of their devolution deals.

‘Therefore, although the rules of Managing Public Money indicate that the department should recover the overpayment, I have issued a direction requesting that the permanent secretary does not do so in this extraordinary circumstance.’

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