Rural Upper-tier Local Authorities

Helen Morgan Excerpts

Wednesday 2nd September 2026 Westminster Hall

[Helen Morgan (North Shropshire) (LD) [R]]

I beg to move,

That this House has considered Government support for rural upper tier local authorities.

I am a vice-president of the Local Government Association, and I am extremely worried about the widening gap in opportunity, social mobility and economic growth between rural and urban areas. Rural areas are being held back and the futures of rural children are being limited by public services that are underfunded and overstretched, lamentably slow digital connectivity, the lack of public transport, and urban-centric perceptions based on misunderstandings about the nature of rural life.

The last local government finance settlement laid bare that neglect in financial terms. It was a stark admission from this Government that their plan is to strip funding from rural areas to improve services in urban ones. The Rural Services Network has calculated that urban councils will receive 32% more funding per head than rural councils next year. Meanwhile, rural residents pay on average 17% more council tax per head than urban residents, out of lower than average wages, to plug the gap, yet the cost of delivery means that they receive a poorer public service.

For Shropshire council, the funding situation is particularly grave, following 16 years of catastrophic management by Shropshire’s Conservatives. When the Lib Dem administration took over in May 2025, Shropshire was in the most difficult financial position of any council in England. The recent Chartered Institute of Public Finance and Accountancy report on the huge challenge in Shropshire reveals the details of the Conservatives’ poor management: unrealistic budgets and constant overspends that burned through all the remaining reserves; an obsession with unaffordable vanity projects, such as the purchase of Shrewsbury’s shopping centres and millions spent on an unaffordable road; a sloppy workforce restructure in 2024-25, which drove out the talented managers needed to transform the financial situation; and the “legacy impact” of five years of consecutive council tax freezes. All that was left as a parting gift for the new administration to pick up. The report describes the direction of the council under its recently appointed new chief executive and four-to-five-year improvement plan as a “positive step”, and a peer review by the LGA praised the “significant strides” made so far, but the financial position remains perilous and the challenge to restructure the council is huge.

Eighty per cent of Shropshire council’s budget is spent on social care, an issue on which the Liberal Democrats have long called for urgent action. The cost of delivering social care in a rural area with the demographics of North Shropshire, where 25% of the population is aged over 65, means that the pressure is only set to rise. Adult social care spending has already been rising by about 5.8% a year, more than could have been generated by council tax increases, because people are living longer, needs are becoming more complex, and workforce costs are rising, with care providers consequently charging more.

Demand for education, health and care plans has risen even faster. Shropshire now has 3,016 active EHCPs, a 21% increase in one year compared with national growth of 11%. The number of school-aged children with EHCPs has increased by 78% since before the pandemic. That puts more pressure on specialist education, school transport and family support. Last year, the council put up council tax by 8.99%. Although that brought in a massive £21 million a year, it covered only about a third of the extra cost from demand and inflation alone.

Amid that financial turmoil, the Government have cut funding per head in Shropshire. It is projected to fall well below 90% of 2024 funding by 2028, while the national average is set to rise to around 118%. The exceptional financial support provided to balance the books bears interest and must be paid back; it worsens prospects for the future, and for a considerable time. Under the Government’s new devolution plans, there is a risk that the gap between mayoral and non-mayoral authorities could increase further.

During the Prime Minister’s statement yesterday, I asked him about the importance of power and resourcing being made available to all authorities, not just those that have formed a combined authority or have a mayor. His answer was in some ways encouraging, but in other ways it bothered me. He said that when Shropshire council could

“stand on its own two feet”—[Official Report, 1 September 2026; Vol. 790, c. 49.]

it would be able to access devolution, but the Government’s own three-year financial settlement is forcing austerity on rural areas, making the achievement of self-sufficiency far less likely.

[Noah Law (St Austell and Newquay) (Lab)]

I am sure that the issues in Shropshire that the hon. Lady mentions are the same as those that we in Cornwall have experienced. Does she agree that the move to a mayoral share of income tax is not a detriment to non-mayoral areas like ours but an opportunity to reset the model? We have seen integrated settlements and money being thrown at mayoral regions, but this is an opportunity to turn the taps off for those regions and turn them back on for areas like ours that have not proceeded with a mayor.

[Helen Morgan]

The hon. Gentleman makes a good point. I would need to see the detail of that proposal and what it would mean. Shropshire is already a unitary authority and is essentially at the bottom of the list for a devolution plan, so that seems too far off. There seems to be no prospect of stabilising the financial situation until there is a firm plan to ensure that the powers needed to turn the area around, and the resources to go with them, are firmly in place. We urgently need clarity on that.

The hardship and austerity in rural areas has come about largely as a result of the removal of remoteness as a factor when calculating what it costs for a rural authority to deliver services across a vast area. The County Councils Network estimates that that has removed £300 million from its members’ budgets—an amount that the Government expect to be made up by increased council tax.

Shropshire council has been squeezed at both ends—first by years of Conservative maladministration, and then by Labour cutting its funding, despite the obvious need —and it is far from alone. Rather than tackling the problem head on, the Government have underfunded rural councils, which has perpetuated rural deprivation. That is particularly acute where people lack access to services, and it is hidden, unlike urban deprivation.

While door-knocking in my constituency, I met a delightful elderly gentleman living in a small cottage, and I was astonished to also meet his grandson, who was apparently living in his shed in the garden because he was unable to find anywhere else to live. Such cases go unnoticed in homelessness statistics, because families and communities find their own solutions to wrap around those individuals, but no one thinks a shed is appropriate accommodation for that young man. He should not have been allowed to fall through the net.

A lack of funds for local transport perpetuates isolation and leads to a vicious cycle, stunting economic growth and creating further challenges for the council’s provision of services such as social care. When members of the Casey commission came to Shropshire to talk about the challenges of delivering social care in a rural area, they were astonished by the notion that carers must have a car because there is no transport in the evening or on a Sunday.

Yesterday, the Prime Minister spoke of the importance of local transport and publicly provided services. We all agree with him, but Shropshire’s bus allocation has been cut despite the fact that it has lost more bus miles than anywhere else. Revenue funding is due to drop £175,000 in 2027-28. The Secretary of State for Transport, in an answer to me about step-free access at Whitchurch station, implied that the funds will be spent where the people are, not where the need is. She said:

“When we are investing in the accessibility of stations in the future, we need to get maximum benefit for the travelling public.”—[Official Report, 16 July 2026; Vol. 789, c. 1059.]

Previously, that has meant that the funds go to the most densely populated areas, not to those where there are no real alternative forms of transport.

The patchy public transport network across North Shropshire means that it is almost impossible for most residents to manage without a car, and that brings further associated costs. Those who cannot access a car, whether they are young or old, become isolated and unable to access opportunities, education and services.

Similar patterns of deprivation are reinforced through Government funding for education in rural areas, even though they often already struggle with teacher recruitment and retention. Schools in North Shropshire received an average of £6,460 a head last year, compared with a national average of about £7,910, but outcomes at GCSE and key stage 4 are consistently lower than the national average, and indeed the west midlands average. How can the Government justify lower funding when the outcomes are already lower? Surely every child deserves the opportunities provided by a properly funded education.

That applies to capital spending in education too. One shocking example in my constituency is a primary school in one of the most rural parishes that still has outside toilets, in their original Victorian red-brick building. A lady told me during my summer tour this year that her granddaughter was too afraid to use the toilets because they are full of spiders and had an accident at school as a result. That is unacceptable. That is the kind of thing that people remember when they are 50 if it happened to them when they were seven at school.

Young people in rural areas are having their horizons limited as a direct result of Government policy. That needs to change, urgently. In what way are the Government tackling inequality if rural and coastal areas are persistently underfunded, despite their worse outcomes? My constituents rightly perceive an entirely broken system in which every year they pay more and receive less. That is obviously unfair and is opening the door wide to populists and extremists who exploit the situation with divisive messages to divide our community and simple but unworkable solutions.

The new Prime Minister has given us all hope by promising growth in every postcode. He will fail in rural areas if he does not address the obvious unfairness that Government policy combined with the pressures of ever-increasing demand for social care are delivering. Proper devolution will help rural councils tailor public services to the areas that they serve, but there must be acknowledgement of the need for a fair allocation of resources to go with those theoretical powers. I hope the Minister can provide details in his response.

--- Later in debate ---

[Perran Moon (Camborne and Redruth) (Lab)]

Meur ras —it is an honour to serve under your chairship, Mrs Barker. I congratulate the hon. Member for North Shropshire (Helen Morgan) on securing this important debate.

I want to focus on SEND and home-to-school transport. On SEND, Cornwall is the 11th lowest funded of 151 local authorities, receiving less than half the per pupil funding of Kensington and Chelsea. Over the last eight years, the number of our pupils with an EHCP has almost doubled, but the delays in issuing EHCPs are far longer than average. In Cornwall, two thirds of those waiting for an EHCP wait for more than 20 weeks, compared with about 50% in England, meaning more stress and uncertainty for Cornish children and their parents.

In a very large, long and remote coastal region, the additional costs of transport show up persistently in every aspect of Cornish life. Cornwall council’s expenditure on home-to-school transport has increased by nearly 300% over the past seven years—a far steeper rise than for our urban counterparts. When it comes to funding more broadly, being a coastal community with some of the UK’s finest beaches is actually a double-edged sword; in fact, it could be argued that we are damned by our natural beauty. Significant in-migration by wealthy English retirees not only places additional pressures on healthcare and our housing market but masks the true extent of deprivation in Treasury funding models.

In my constituency, the average weekly wages in Camborne, Redruth and Hayle are nearly £100 less than the national average, and child poverty is currently at 35%. We were very thankful that the costs of being remote and coastal were recognised in the local government funding settlement for adult social care, but the cost pressures for home-to-school transport were not reflected. I respectfully say to the Minister that a principle cannot be half applied.

[Helen Morgan]

The hon. Gentleman is making an important and fundamental point: everything costs more when it is spread out. For example, bin collections cost a huge amount more for unitary authorities. Home-to-school transport is not just for children with SEND but for children who cannot catch the bus to school because there is no bus. Everything costs a vastly significant amount more than when people just live down the road. Does the hon. Gentleman agree that it is really important that that is reflected in Government funding formulae, because it is crippling our councils?

[Perran Moon]

I do agree with the hon. Lady. I cannot believe that in the 21st century it is beyond the wit of man or woman to calculate the major costs that affect our rural and remote coastal areas compared with the costs for our urban counterparts. We are not trying to deprive the services available in urban areas; it is about raising the level of services for remote coastal and rural communities to the same standard.

That brings me back to my central point. Despite the rising costs and demands, Cornwall is being asked to do far more with far less, which is why we need a comprehensive, non-mayoral, Cornwall-only devolution deal that allows us to overcome some of the challenges of life in the Duchy.

--- Later in debate ---

[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.

--- Later in debate ---

[Helen Morgan]

I thank all hon. Members who have come along and made excellent speeches—particularly team south-west, who have turned out in force. They all highlighted the difficulties in delivering services in sparsely populated areas with vast distances to travel. They spoke about the impact on highways funding, the importance of generating economic growth, the cost of delivering SEND, and the proxy creation of district councils through the re-empowering of town and parish councils to deliver things that the unitary council can no longer afford to deliver because they are not a statutory requirement. They were really good speeches.

I am very disappointed that the Minister wound up with a speech that kind of told us that everything is actually fine. On the day that the local government finance settlement was announced, I sat on the Opposition Benches, along with all my colleagues, without a clue about what my local authority had been awarded because it was not findable, we had not been told and it could not be googled, yet everyone on the Labour Benches appeared to know what their settlement was and congratulated the Minister on its delivery. That is symptomatic of a pattern of this Government. They tell rural areas, “Everything is fine. It looks pretty. Go away and stop worrying, and actually, we are going to focus on urban areas.” We all recognise that urban areas need investment and are not thriving as they should be—this is not about pitting one area against another—but rural areas need fair funding and devolution. In a council that has stripped back every single employee that it can, there is no capacity to generate economic growth or transform the underlying financial structure of the council, because nobody has the time in the day to do it. They need that devolution funding to rethink how they deliver services in a sustainable way for the future. I hope the Minister will take those points on board.

Question put and agreed to.

Resolved,

That this House has considered Government support for rural upper tier local authorities.