Health authorities in some of the most deprived areas in the country have expressed serious concerns that a new method of allocating inequalities payments has deprived them of millions of pounds of extra funding.

A total of£70m, the interim inequalities adjustment, has been allocated to 47 HAs across England for the next financial year, using a formula that has meant East London and the City HA, which includes some of the most deprived areas in the country, came 48th on the list and has received no extra funding.

The money has been allocated on the basis of 'years of life lost' up to the age of 75 using the four target areas - deaths from cancer, coronary heart disease, accidents and suicide - and deaths from unknown injuries.

But HAs, including East London and the City, Redbridge and Waltham Forest, and Lambeth, Southwark and Lewisham, say their younger populations mean that, despite high levels of illness and deprivation, they have missed out on funding because the index used has not been age-adjusted.

Under previous allocations of inequalities and deprivation payments, London HAs featured prominently, but this year the only one to receive the funding is Camden and Islington. The allocation has led to suggestions that in an election year, northern constituencies have been favoured for funding ahead of southern and London areas.

East London and the City HA chief executive Carolyn Regan said the potential loss for the authority was£1.2m, and the biggest problem was that the allowances 'were not standardised for age'. She said if the allocation was age-standardised 'we would rank as third worst, behind Manchester and Liverpool'.

Redbridge and Waltham Forest HA director of public health Dr Parameswaran Kishore said there were also concerns that the new formula could be used more widely in future.

'We are unhappy with the use of years of life lost, ' he said. 'There are two concerns I have - it is not age-standardised and it will not take into account morbidity. We have a lot of problems with mental health and chronic ill-health like diabetes and hypertension.'

The decision to use the interim method of funding was taken by the advisory committee on resource allocation, which is undertaking a longer-term review of funding allocation.

It is due to provide a preliminary report by 2002 and a final report by 2003. The Department of Health said the current index would be used until that time and it was possible it would then be rolled out to other areas of allocation.

King's Fund health economist John Appleby backed the call for the index of funding to be agestandardised and said the age cutoff of 75 was too high.

He said that for an HA with a young population, like East London, 'if you standardise for age it has a high number of years lost'.

'It may be that you end up rewarding areas that are not deprived. The other thing is they have a fairly arbitrarily chosen cut-off. It does seem to be a bit counter-intuitive. These are areas of high deprivation.'

East London and the City HA wrote to health minister John Denham at the beginning of December to express concerns about the way in which funding has been allocated, but no response has yet been received.