Camden in north London is expected to receive pounds 20.9m as a result of Court of Appeal victory and a further 15 other councils are expected to benefit from the judgment made yesterday.
Steve Bundred, Camden Council's chief executive, said: "This is a victory for common sense and for long-suffering council tenants." He said that cuts in the Government's housing grant over years have left many of its estates "with simply no cash for vital repairs" and that the extra money could now be used for housing investment.
The extremely complicated case centred on whether the DoE was obliged to pay a subsidy when the council made a change to its accounting practice for its housing revenue account. Camden, along with other councils, had been asked to change its accounting practice for its housing revenue account, the separate budget for housing services, to bring it in line with recommendations from the Chartered Institute of Public Finance and Accountancy.
Although the Act governing the operation of housing revenue accounts came into force in 1990, it was not until 1994/5 that Camden changed its system in line with the recommendation. This involved a one-off payment for which the council argued it was entitled to a subsidy of pounds 20.9m. The Secretary of State for the Environment had argued that if the council had adopted the new accounting method before 1990, no adjustment would have been necessary.
Lord Justice Roch said in his judgment that he was prepared to accept that the Secretary of State intended that the subsidy should not be paid, but had not worded a directive clearly enough to achieve this.
The judge said the council had argued that if the subsidy were not paid, it would mean either an average rise of pounds 230 for every council taxpayer, or massive cuts in council services.
The judge rejected the Secretary of State's claim, saying that although ministers had not wished to pay the subsidy, if the Secretary of State "has not used the words necessary to achieve his objective, that is unfortunate".
Mr Bundred said yesterday: "We have to fight for every penny for regeneration of our run-down estates. This money has been kept from our 30,000 tenants. It is overdue and very welcome."