The changes, which are being considered by the DoE, are likely to be opposed by district and county councils.
The Association of Metropolitan Authorities says the current method, which aims to cushion council tax payers against losses of grant, is unfair.
It points out that it works against deprived urban areas which are more dependent on grant. The structure of the grant system means that in an authority which is dependent on central funds, a withdraw of grant leads to a disproportionately greater increase in council tax.
At the other end of the spectrum, in Wokingham DC, the same 2% reduction only leads to a 4.2% increase in tax.
The AMA argues that the compensation scheme should be changed to give more relief to authorities where the impact of grant reductions has the greatest effect on council tax payers.
'We are seeking a level playing field, council tax payers in deprived met areas should be given the same degree of protection from potential standard spending assessment losses,' said AMA policy officer Phil Walker.
The association is also proposing a change to the way reduction grant is paid in shire areas.
At the moment grant is paid at both the county and district council level whereas in unitary authorities payments are limited to the impact across the board.
This means that a metropolitan authority only gains compensation if changes in the grant payments across its services lead to a net loss.
In shire areas the council tax payer would receive compensation at a district level for a loss of funding irrespective of a gain in grant at the county level.