RURAL communities get an unfair deal from the way the government funds local authorities, an independent commission has been told.

The warning was made by the Rural Services Network in response to a call for evidence by the Independent Commission on Local Government Finance.

"The present local government finance system completely fails in two fundamental respects," says the network's submission. "It is not fair and it is not transparent."

"A fair local government system must properly and fully take into account the unavoidable costs faced by local authorities in providing services across their geographical area."

The commission is examining the system of funding local government in England to see how it can be reformed to improve funding for local services and promote sustainable economic growth.

The commission was founded, and is supported, by organisations working in local government who recognise that there is a real and pressing need for reform to the system.

The Rural Services Network says population dispersal and settlement patterns add substantial costs to service delivery which are not properly reflected in the current system – and never have been.

It says the historic under-funding of rural councils has led to a situation where rural residents pay more council tax per head but receive fewer government grants than urban authorities.

Overall, council tax is £79 higher per head in the countryside than in cities but urban areas receive government grants worth £178 more per head than people living in rural areas.

"Council tax has long been higher in rural areas in order to counteract the lower levels of government grant that has been received to deliver services that cost more," says the network.

"We are extremely concerned about the operation of damping in the current system.

"Damping should be transitional relief from violent swings in funding for councils rather than the permanent feature which it has now become.

"Spending decisions of successive governments based on political motivations, have been embedded into the local government finance system through the damping regime."

The network says it regards as "ludicrous" that in its 2012 summer consultation the government acknowledged the rural case and amended several formulae accordingly.

But damping and other changes wiped out some 75% of the gains from the improved formulae for rural authorities and actually saw their total funding for faster than the urban counterparts.

"We support impartial, objective, needs-based policy which is equitable to all," the network says. We accept the need for all areas to contribute to deficit reduction.

"However, we are saying that a time of austerity it is more, not less, important that allocations are fair and based on objective, need rather than political consideration."

The full submission can be downloaded here.