South Hams District Council has unveiled a draft budget including a council tax increase, warning that rural communities are being "disadvantaged" by government funding formulas.

The local authority said it faces a budget shortfall of £2.6m for the 2027/28 financial year, driven by rising inflationary pressures and a 10.1% reduction in government funding.

Councillors have approved a rise in the South Hams portion of council tax for a Band D property from £196.66 to £202.54 — an increase of £5.88 per year, or roughly 11p per week.

The council has hit back at the government’s claim that its latest financial settlement delivers "greater fairness" for local authorities.

Analysis by the council suggests that by 2026/27, urban councils will receive 41% more per head in government spending power than their rural counterparts.

Leaders argued the current model ignores the "unavoidable additional costs" of delivering services across sparsely populated areas, leaving rural residents to shoulder a heavier burden through council tax.

Cllr Dan Thomas, Leader of South Hams District Council, said: "We are being open about the financial challenge we are facing.

"The rising costs of delivering vital local services mean we must take difficult, but responsible, decisions to ensure we continue to support our communities."

Despite a reduction in funding of approximately £700,000 for the coming year, the council said it remains committed to protecting essential services and "supporting vulnerable residents."

The draft budget outlines planned investments for 2026/27, including:

To balance the books, the authority is proposing a combination of efficiency savings, changes to fees and charges, and new income-generation schemes.

The council is now lobbying the government to reinstate "evidence-led weighting" for rurality and remoteness in future funding settlements.