London councils flooded with immigrants from Eastern Europe are to lose £40 million in government funding next year because of changes in calculating population estimates.

Council leaders across the South East are furious that the Office for National Statistics has cut 60,000 off London migrant figures alone after using the new formula. Four town hall chiefs have written to the Treasury claiming that new figures have underestimated actual levels and will force them to raise council tax or cut services next year.

Westminster, Slough, Hammersmith & Fulham and Kensington & Chelsea councils have asked ministers to abandon the new estimates, which suggest that many migrants have moved out of London to the North East and North West. They are commissioning their own surveys to identify the true levels.

Sir Simon Milton, the Tory leader of Westminster City Council, said: “We simply do not believe [that] the official statistics remotely represent the true picture of migration into Westminster.” He said that the council had anecdotal evidence that more than 2,000 migrants were coming through Victoria coach station every week, which tallied with national insurance figures.

Westminster estimates that it will lose at least £6 million in funding in each of the next three years owing to the new calculations but Sir Simon, who is to commission his own survey, says that 14,466 migrants from Eastern Europe registered to work in Westminster in the past two years, the largest influx in the country.

The Office for National Statistics used to base its estimates on a combination of the Census and the International Passenger Survey, based on interviews of those arriving at ports and airports. After evidence from Labour Force surveys that migrants were moving out of London to the North and from cities to rural areas, however, the ONS switched its methodology and uses a mixture of Labour Force data and International Passenger data.

Councils have complained that many migrants are not in work, are sleeping rough or in multiple occupancy buildings and would not be picked up under the new formula.

Stephen Greenhalgh, the Tory leader of Hammersmith & Fulham Council, which is to lose £4 million, said: “The Government’s new figures suggest that we have fewer migrants than three years ago, which is frankly inconceivable.” National insurance registrations by accession state citizens was up by 550 per cent even before other migrants were counted, he said.

Kensington & Chelsea Council has been forecast to lose 20,000 migrants from previous estimates, resulting in a £20 million loss in each of the next three years. “This loss of funding will put a considerable strain on our ability to provide the excellent services we pride ourselves on,” Merrick Cockell, the Tory Leader of Kensington & Chelsea Council, said.

Mr Cockell said that the new methodology failed to count temporary migrants who were in the capital for up to nine months. As the chairman of the London councils, Mr Cockell will raise the issue tomorrow at a meeting with Jim Fitzpatrick, the Minister for London.

A spokesman for the ONS said yesterday that the migrant population in London had grown by 336,000 between 2002 and 2005 but this was still less than forecast under the old system. He said that new figures for short-term migrants, those staying in England or Wales for between 3 and 12 months, would be published in August. The estimated figure for 2004 was 237,000 people. A further 528,000 people stayed for less than 3 months, he said.

Liam Byrne, the Immigration Minister, said that a new group would meet next month to help to keep a closer track of the issue. “We have to accept that migration can have a wider impact on British public life,” he said. “That is why we need much tougher checks on people abroad before they come here in the first place.

“But it also means that we need to be upfront about listening to local authorities and local parts of the NHS about whether there are impacts.”

Times Recommends

• UK regional accents thrive against the odds
• ‘Scarecrow’ wind farms put rare birds to flight
• What an anti-climax: G-spot is a myth