North Yorkshire Council's legal action against the government over a loss of funding could cost taxpayers more than £250,000.
But Council leader, Carl Les, has told colleagues he believed the loss of the £14.3m rural services delivery grant was worth challenging.
The authority has begun legal proceedings against the government over its decision to cancel the grant, which was paid to rural authorities to cover the extra cost of delivering services in sparsely populated areas.
A letter before action has been sent to ministers ahead of the authority seeking a judicial review of the decision.
Cllr Les told colleagues at the authority’s full council meeting at County Hall in Northallerton that the government had replied to the letter.
He said:
“We have sent a letter before action. That has elicited a response.
“We are studying that response as we speak and there are some further questions that are coming out of that which will allow us to follow this up with a continuing letter.”
Questioned about the cost of the legal action by opposition councillors, the leader said:
“£14.3m is the amount we lost at the stroke of a pen. I think that is worth challenging. I would hope that members would agree with that.
“The cost could be £250,000. It could be even more if either side decides to take it beyond the High Court and actually take it to the House of Lords.
“It could be a very large sum. So far, we’ve spent about £1,200.
“Almost all of that is in-house although we have taken some advice from a barrister who charges £625 per hour, but we’ve only had a very small amount of advice.”
Cllr Les said the authority had a budget within its legal services department for court action.
He added:
“There will be further cross-party discussions, especially with those other rural councils of all colours who have also been hit by this unfair move, not as badly hit as us because we have been hit the worst of all councils in the country."
The government announced in November that it was axing the £110m fund.
The legal letter challenged the government’s decision on three points — the consultation process, the rationality of the decision and the impact it would have on the council’s public sector equality duties for the rural population.
Ministers have defended the decision to cancel the grant saying it did not properly account for rural need and a large number of predominantly rural councils received nothing from it.
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