Oxford council tenants are subsidising local authority housing in other areas of the country to the tune of £17 a week per household.

The disclosure comes today (June 22) in an Audit Commission report branding the subsidy system unfair and urging the Government to abolish it.

The scheme forces 82 per cent of councils that own housing stock -- including Oxford city -- to prop up the loss-making minority.

Oxford's 8,000 council tenants are each paying an average of £17 out of their weekly rent to councils which cannot otherwise make ends meet -- most of them in London and the North West.

Oxford's contribution to the fund is one of the highest in the country and above the £13 average for the South East. By comparison, the average London council tenant is having their rent subsidised by £15 per week.

The Audit Commission said the system should be scrapped so profitable councils could keep the money for their own uses.

Under the system, which has been in place for 17 years, subsidies are determined by central Government according to estimates of councils' income and expenditure needs.

But, because councils in London and the North West have dispproportionately high levels of debt to finance, local authorities elsewhere -- totalling 82 per cent -- find themselves paying out.

Louisa Dean, spokesman for Oxford City Council, said: "All money paid by Oxford's council house tenants goes into the housing revenue account.

"If the system was to change it would allow us to keep money to invest in our stock, which would obviously be of great benefit to us."

The council is the only local authority in Oxfordshire to have maintained control of its council house scheme. Elsewhere, control has been handed over to private housing associations.

The Audit Commission report found that the present system did not encourage efficiency or high performance.

It said that the national approach was increasingly inappropriate and failed to distinguish between good and bad performers.

The report said that the Government should instead focus on finding financial solutions to help local authorities that were relying on subsidies from other councils elsewhere in the country.

It added: "The current system means that, in many areas, local authorities' tenants on low incomes are subsidising services to tenants who may also be on low incomes in other local authorities."