Final Local Government Settlement: Key Questions Remain For Rural Services

The Government has published the Final Local Government Finance Settlement for 2026–27 to 2028–29. The settlement sets out how much funding local authorities will receive over the next three years and underpins major reforms to the local government funding system.

As the national champion for rural services in England, we have undertaken an initial assessment of the settlement’s implications for rural councils and rural communities. While further, more detailed analysis is ongoing, our early findings raise serious concerns about the direction of travel for rural service funding.

A Growing Imbalance In Government-Funded Spending Power

RSN’s initial analysis shows that urban councils continue to receive significantly higher levels of government-funded spending power per head than rural councils.

• In 2026–27, urban councils are set to receive around 32% more per head than rural councils.
• By 2028–29, government-funded spending power for urban councils will have risen by around 20%, compared with just 2% for rural councils.

This pattern risks embedding a funding gap that leaves rural councils increasingly exposed, despite the higher costs associated with delivering services across sparsely populated areas.

Increased Pressure On Rural Residents

Lower levels of government funding mean rural councils are more reliant on council tax to sustain essential local services. RSN’s analysis indicates that rural residents are expected to pay around 17% more per head in council tax than urban residents in 2026–27, effectively being asked to compensate for structural funding shortfalls.

This places an unfair burden on rural working households, particularly given that average earnings in the rural economy remain below the national average.

Changes Between The Provisional And Final Settlement

The final settlement includes a substantial increase in funding distributed through the Recovery Grant compared with the provisional settlement. However, RSN is concerned that this grant is allocated using outdated IMD 2019 deprivation data, even though IMD 2025 data is used elsewhere within the settlement.

This inconsistent use of evidence raises questions about transparency and whether funding decisions are being made on a robust and up-to-date basis.

Remoteness Still Not Properly Recognised

A further concern is the treatment of remoteness within the new funding formulas. The final settlement removes the remoteness uplift from the Area Cost Adjustment for all services except Adult Social Care.

This is despite previous Government analysis concluding that there was a “compelling theoretical case” for recognising remoteness as a cost driver. The ongoing realities of delivering services in rural areas - longer travel times, smaller vehicle fleets, duplicated infrastructure and weaker competition when services are tendered - remain largely unaccounted for.

Questions Over The Evidence Base

While the Government has emphasised deprivation as a key driver of funding allocations, no new evidence has been published to demonstrate that deprivation is the primary cost driver for local government services overall.

Earlier MHCLG research found that population, not deprivation, explained the vast majority of cost variation across both upper- and lower-tier services. In the absence of updated evidence, the RSN is concerned that recent changes appear policy-led rather than evidence-led.

Parliamentary Debate

During the Final Local Government Settlement Parliamentary debate, MPs across the country  raised a number of detailed questions about the funding formula, including the treatment of rurality and remoteness beyond adult social care. While the Minister restated the Government’s focus on deprivation-based allocations, questions remain unanswered about how the funding formula reflects the full costs of delivering services in remote and rural areas. Read more about the debate here

Championing Rural Services: RSN’s Evidence, Advocacy and Next Steps

As the only national body focused specifically on rural service delivery in England, the Rural Services Network will continue to scrutinise how funding formulas translate into real-world service delivery in rural places.

Through our direct engagement with Ministers, formal consultation responses, and our ongoing role as Secretariat to the APPG for Rural Services, we will continue to bring together local authority evidence and frontline experience to ensure rural places are not overlooked in policy, funding and reform.

RSN analysts are continuing to examine the detailed figures and formulas within the final settlement. We will publish further analysis in due course

Every person, in every place should benefit from a fair funding system.