Rural Upper-tier Local Authorities

Debate between Helen Morgan and Caroline Voaden

Wednesday 2nd September 2026 Westminster Hall

[Caroline Voaden (South Devon) (LD)]

It is a pleasure to serve with you in the Chair, Ms Barker. I thank my hon. Friend the Member for North Shropshire (Helen Morgan) for securing this important debate.

Before moving to rural South Devon in 2007, I had spent all my life living in and around major cities: Edinburgh, Sheffield and then London. After nearly 20 years living in the rural south-west, I can honestly say that I had previously not understood rural life because I had not lived it. I have since come to realise that the rural-urban divide is possibly one of the deepest divides in our country and one that is too often overlooked, especially by Governments made up of city and urban MPs who simply do not understand the reality of rural communities and fail to see the deprivation that lurks behind the hedgerows.

Those communities are often forgotten when spending decisions are taken despite a set of circumstances that mean we desperately need the Government’s financial backing. Incomes are lower due to the older average age, jobs are often seasonal and low-waged, people in rural areas travel almost twice as far as those in urban areas, and there is often no public transport. Healthcare is a challenge because community services have been cut, hospitals are miles away and hospital transport has all but disappeared. High-speed internet is crucial when services are scarce, yet broadband connectivity lags far behind urban areas. Banks, pubs and post offices are closing, hollowing out communities and increasing rural isolation. As the hon. Members for Camborne and Redruth (Perran Moon), for St Austell and Newquay (Noah Law) and for Truro and Falmouth (Jayne Kirkham)—all of them from Cornwall—have said, the high number of second homes, high house prices and low wages massively exacerbates the housing affordability crisis. In Devon, the full-time salary to house price ratio is 10.6:1—well above England’s average of 8.7:1.

Despite all that, funding is persistently driven into urban areas while rural communities are left behind. The previous Conservative Government forced councils to do more with less. Their policy to force local authorities to use their reserves to subsidise their revenue expenditure was deeply wrong and, as a result, six rural upper-tier local authorities are on the brink of issuing section 114 notices, which would effectively declare them bankrupt.

The current Government have committed to providing multi-year funding settlements for local authorities, which we welcome, but for rural communities the 2026-27 to 2028-29 settlement falls well short. The withdrawal of the rural services delivery grant was a huge blow to councils in Devon, costing about £14 million, and no rural councils benefited from the replacement funding or recovery grant.

The new formulas mean that local authorities in cities will have higher spending power than in previous years while rural shire districts will have less to spend. Under the local government finance settlement for this year, urban councils will receive 32% more per head in Government-funded spending than rural councils. Devon county council will receive £1,056 in core spending power per head compared to Hackney council’s £1,645 or Liverpool city council’s £1,598. It does not cost 50% more to provide services in Hackney or Liverpool than in Devon. In fact, I would argue it potentially costs less because of the rurality.

Furthermore, the Government’s 2026-29 local government finance settlement does not include any explicit support for rural upper-tier authorities. The new formula has included remoteness only as an uplift in the formula for adult social care. As my hon. Friend the Member for Horsham (John Milne) said, a rural child is not easier to service than a rural adult. It is utterly shocking that the Government do not believe that remoteness is relevant to the delivery of any other service, such as school transport or waste collection.

It goes way beyond the additional time it takes to travel. Rural councils have several other considerations that urban councils simply do not have to contend with, including requiring more service centres due to the spread-out population and more professionals to cover visits across a huge rural area. They receive fewer responses to contract tenders, perhaps only getting one from the incumbent provider, which leads to a market with increased prices for services.

There are physical constraints such as needing smaller refuse vehicles, especially on the narrow lanes near where I live in Devon. Those vehicles have to return to base to be emptied more often, and rural areas also need multiple depots for equipment and vehicles. Thus, they need more equipment to service the streets and more drivers.

Pockets of deprivation, often hidden by prettiness, are particularly hard hit. Social mobility for young people living in deprived rural areas is one of the lowest in the country. None of this is considered in the new funding formula outside of adult social care. I urge the Minister to review that.

Quite simply, the new system of allocation does not recognise that the sparse and isolated nature of rural areas drives higher costs for the delivery of essential services, creates challenges in recruitment of staff for key services and requires local authorities to provide a greater public subsidy for the provision of public transport. This is very much in keeping with a Labour Government that have persistently failed to acknowledge that every service is harder to deliver across rural areas.

Let me use Devon to illustrate why this service delivery is so tough. Rural Devon is a drive of over 100 miles from north to south. It would take me 10 hours to walk across just my constituency, which is a fraction of the county, and nowhere near the biggest. I am not sure how Manchesterism will translate to rural areas, but we cannot apply the same principles to a city of 3 million people and villages with just 10 houses and expect to see the same results.

The trajectory for rural councils over the next three years is deeply concerning. The very limited increase in Government funding will require service reductions or significant increases in council tax or business rate income to maintain core spending power. As has been said, rural residents will pay 17% more in council tax per head compared to urban residents this year, yet Government funding will be directed towards urban authorities.

The Government are relying on a regressive council tax to fund services in rural areas that it was never meant to. As a result of this funding settlement, by 2028-29 urban councils will have seen a 20% increase in Government-funded spending power, compared to only 2% for rural councils. How can that be fair? These are not just numbers on a spreadsheet; we are talking about people’s lives. From the growing number of children with SEND who cannot access the support they need to the closing of vital community spaces like libraries and leisure centres, this lack of funding has a real impact on people.

We are concerned by the Government’s decision to allocate additional funding within the local government finance settlement on a need and demand basis. It will jeopardise the sustainability of rural local councils. The Liberal Democrats oppose the three-year local government finance settlement, which does not go far enough in providing a truly fair funding settlement to all local authorities across the board. We urge the Government to provide rural councils with a funding settlement that reflects the true impact of rurality and sparsity of the areas they serve through the application of the fair funding formula.

The ability to provide services to people in my constituency and across rural Devon will only be made worse by the proposal for four unitary authorities recently chosen by the Government for the local government reorganisation in Devon. I urge the Minister to bear with me on this. That proposal from Labour-run Plymouth and Exeter will see those two cities massively expanded, to the great delight of their Labour MPs, and a new urban growth area based around Torbay, leaving a fourth authority—the bits that were left behind when the urban areas were gouged out—stretching 70 miles from Ilfracombe in the north to Salcombe in the south, but 100 miles by road. That authority will have to maintain a road network not dissimilar to the whole of Luxembourg’s with no major town to offer opportunities for growth and regeneration and the most deprived area of Devon to support.

[Helen Morgan]

The point of combined authorities is to derive economies of scale from placing urban and rural areas together. Some of those economies of scale can be driven by the density in the urban area. Does my hon. Friend agree that it makes no sense to split up the urban and rural areas in the way she describes?

[Caroline Voaden]

I absolutely agree. It makes no sense to any of us in Devon. I have spent the entire summer listening to constituents who are deeply distressed about what has happened, which leaves them in a rump rural local authority with no option for economic growth or regeneration.