PUBLIC services face the axe under government plans to increase the penalty which sees rural residents pay more yet receive less in return.

Rural local authorities have reacted with disbelief to the government's latest funding consultation which moves considerable resources to urban areas in London and the south east of England.

The consultation – covering the period to March 2016 – actually widens the "rural penalty", where urban dwellers presently receive 50% more funding per head than rural dwellers despite paying lower council taxes.

It was launched just days after a report by MPs slammed the government for giving rural areas a raw deal.

"The Government needs to recognise that the current system of calculating the local government finance settlement is unfair to rural areas," said the report by the Environment, Food and Rural Affairs Select Committee.

It added: "Defra needs to work closely with DCLG to ensure future local government finance settlements reduce the rural penalty."

Instead, the DCLG consultation diverts yet more grant to those councils that are already benefiting from high house prices, a greater rate of house building starts and the fact that the Government chose to delay full implementation of its own council funding formulae until at least 2020.

Rural Services Network chief executive Graham Biggs said: "This is yet another body blow for rural councils already struggling to provide services to isolated communities."

Mr Biggs added: "With rural councils facing a further 20% cut in funding over the next two years, it is difficult to see how even the present level of services, already weakened by historic under-funding, can be maintained."

RSN chairman and leader of Rutland County Council Roger Begy said: "It is difficult to believe that the government has ignored both the select committee and the significant number of MPs across the political spectrum that have shown them the need to reduce the funding gap between urban and rural by 10% between now and 2020.

"The smallest funding cuts are with those authorities who are already well placed to help themselves through business development."

He added: "It is essential that the greater needs and fewer development opportunities in rural areas, so clearly identified by the select committee, are properly considered as a matter of urgency."

The consultation, covering the local government finance settlements for 2014-2016, can be found here.