Councils, which face an equal-pay time-bomb, have appealed to government to allow them to raise borrowing or use receipts from asset sales to pay for back-dated claims expected to total at least £3bn. They warn that the alternative could be cuts to local -services.

Fears that equal-pay settlements will prove much greater than previously expected have been raised by a series of recent "no-win no-fee" legal cases. However, the plea would require relaxing the golden rule of Gordon Brown, chancellor, that borrowing should only be used to finance investment over the life of the economic cycle.