Kerry Booth: Why Fair Funding Matters for Rural Councils

Kerry Booth, Chief Executive of the Rural Services Network, was recently invited to contribute a blog reflecting on the funding challenges faced by rural councils. We are pleased to share her article below.

Public services are the backbone of this country, quietly carrying on in the background, making sure that our bins are emptied, our children can get to school, and our most vulnerable are cared for.

At the Rural Services Network we believe that every council should have the resources it requires to meet the needs of its residents. We will only succeed if we enable our rural communities to thrive, alongside our cities, and contribute to the prosperity of the nation. It is perhaps our version of ‘Every Child Matters’.

It is clear that this requires fairly funding rural councils, removing barriers that inhibit the growth of the rural economy, such as improved digital connectivity, access to affordable homes, transport to access skills, training and employment opportunities and effective planning to deliver the right homes, in the right places, with access to infrastructure.

After all, rural England is full of potential. Research shows that if we grow the rural economy, we could potentially add £19 billion to the Treasury. But what happens when the mechanisms that fund councils leave services at risk, and there is a lack of resources available to meet residents’ needs?

This Government has a clear policy aim: it wants to help our most deprived communities. We agree – yet also know that deprivation exists not only in our cities, but also in our villages and hamlets. This is often under-recognised and hidden when statistics and data are collated for larger areas.

Rural councils have long suffered from unfair funding, with the Local Government Finance Settlement leaving them at a disadvantage under successive governments.

The Settlement for 2025–26 saw the £110 million Rural Services Delivery Grant abolished, which had been providing some respite for councils facing the additional costs of rural service delivery. The introduction of the £600 million Recovery Grant, designed to support councils with higher need and service demands based on high clusters of deprivation, has ultimately directed funding towards our cities and away from our rural communities.

As a result, for 2025–26, urban councils receive 40% more in Government Funded Spending Power per head than rural councils. Over the years, to counteract the lack of funding, rural councils have had to increase council tax to balance the books. This means if you are a rural resident, you now pay on average 20% more in council tax than your urban counterpart.

In practice, this means that if you live in a city, the government contributes more to your public services, while if you live in a village, you pay for more of your services yourself – all while your cost of living is likely to be higher, including transport, housing and heating costs.

The Fair Funding 2.0 consultation seems to provide a route to meeting the needs of rural residents, with a fundamental review of the Local Government Funding Formula taking place over the summer. We now await the changes to the formula that will follow, though with a change at the top of MHCLG, it remains to be seen how this will progress in the short term.

This consultation said it would take into account the differing needs of rural and urban authorities. Yet it also wanted more evidence on the additional costs faced by rural councils that were ‘isolated from major markets’. Our councils provided such evidence – showing that not only do they face additional travel time, with the implications that brings for funding services, but are also impacted by their remoteness. There were examples of contracts being let with only one tender received, often from the existing provider, leaving little room for cost negotiation. Councils also highlighted the higher premiums they must pay for home care provision in their more remote areas, as well as the heavy burden of rural Home to School transport in local authority budgets. In some cases, councils reported having to pay for ‘dead miles’ where taxis must travel out from cities to rural communities to transport children to school, adding to the premium charged.

If we do not acknowledge and address the additional costs rural councils face in delivering services to their communities, we risk alienating a sixth of the population who live in rural England. More people live in rural areas than in Greater London.

The government now has an opportunity to put this right: to support and invest in rural communities, address long-term under-investment, and help rural areas contribute to a growing UK economy as places that can thrive too.

Powered by its members, the Rural Services Network is the national champion for rural services, working to influence national policy and secure a fair deal for rural communities.