A partnership between London borough of Tower Hamlets and Northgate Public Services claims that 10 other authorities have expressed interest in taking part.
Under a two year agreement, with an option for a third year, the 'Welfare Resilience Services' partnership will process council services including housing and council tax benefits, local welfare provision, free school meals and hardship payments.
Northgate said the framework for the service is the first of its kind, and 10 other London councils have already declared an interest in establishing a London hub.
Steve Hill, head of benefits services at Tower Hamlets said: "Our partnership with Northgate will provide us with a comprehensive service, offering more flexibility, security and value for money. We have seen how Northgate offers innovative solutions to councils and government and we are looking forward to working with them to build on an efficient and effective partnership in Tower Hamlets and with our wider London partners."
Northgate is a long established provider of revenues and benefits systems to local government, claiming to process 48% of the total payments made in the UK.
Northgate claimed that other London boroughs declaring an interest are: Bexley; Croydon; Enfield; Greenwich; Hackney; Harrow; Havering; Newham; Sutton and Waltham Forest.
Tower Hamlets outsourced its IT, finance and HR two years ago under a £70m contract with Agilisys.
