Future funding quarrels between Sussex councils and Whitehall could be settled with the help of an independent body, a top Government adviser has said.

Sir Michael Lyons said local authorities must receive adequate funding from central government.

Councils which believe they have been short-changed could be allowed to call for an evaluation of their grant, with an independent body established to settle disagreements, Sir Michael said.

Brighton and Hove City Council has argued for years that it gets a bad deal from central government.

The council received a rise in its grant settlement of just two per cent for 2006/7, compared with the 3.1 per cent funding boost the Government shared across the country.

Now Sir Michael has indicated a new system should be established to resolve such rows.

In his latest report on the future of local government, he recommends "making sure that the requirements placed on it by central government are adequately funded".

He also says expectations put on local government should be evaluated and corrected in subsequent financial settlements if they turn out to be inadequate.

Sir Michael recommends "a greater element of independent assessment to reduce disagreement".

His report also leaves the door open for council chiefs to be given greater control over spending business rates.

Business rates are collected by councils and sent to a national pot. Councils get money back as part of their annual settlement.

Central government - not the councils set business rates.

Sir Michael has indicated the system could be changed to allow local authorities greater power over setting and spending business rates.

This would allow them to reap the benefits of soaring economic growth and house-building booms.

A spokeswoman for West Sussex County Council said: "The council has always supported the return of greater control by local authorities over business rates."

Sir Michael said it would also mean the council would become the voice of a whole community - a concept he describes as "place-shaping".

He recommends "providing local government with sufficient financial flexibility to undertake place-shaping effectively, including funding investment and infrastructure projects.

"The debate about greater local discretion over business rates is also relevant here; setting up the funding system so it provides appropriate incentives for the functions it supports."

Sir Michaels report also calls for the job description of councillors to be beefed up. Back bench councillors should be given a greater role in scrutinising proposals from the council and other public bodies, he said.

Sir Michael will publish his final report, including recommendations for overhauling council tax, in December.