South Hams District Council outlines budget proposals in response to growing financial pressures

South Hams District Council has today set out its draft budget proposals for the coming financial year, as they continue to face significant financial pressures affecting rural local authorities across the country.

Rising costs and significant inflationary pressures, increased demand for services and reduced real‑terms Government funding continue to place strain on local budgets. 

The council has also needed to set money aside to replace lost grant funding for economic development and make provisions for investment in coastal defence, while also suffering a reduction in Government funding of around £0.7m (10.1%) for next year, 2026-27. This is despite the Government stating that across the country there has been a 9.6% real terms increase in core spending power over the three year financial settlement to 2028-29.

The council has challenged the Government’s claim that its new funding model delivers greater fairness. Instead, it argues that the changes will disadvantage rural areas such as the South Hams, while urban authorities are set to receive significantly higher levels of support. The council says this approach is “far from fair” for the people and businesses who rely on services in rural communities.

The financial gap between rural and urban authorities is expected to widen over the coming years with rural councils likely to become increasingly dependent on council tax income to keep essential services running, placing more burden on residents in those areas.

Analysis shows that the most urban councils will receive 41% more per head of population in government funding spending power than the most rural councils in 2026/27.

It’s therefore with reluctance that councillors approved a small rise Council Tax for 2026/27. This increases a Band D council tax for 2026/27 from £196.66 to £202.54. Households in Bands A, B and C will pay slightly less, while those in higher bands will pay more. 

This is an increase of £5.88 per year or 11 pence per week in the district council’s portion of Council Tax.

As a result of the Government’s latest settlement not recognising the unavoidable additional costs of delivering services across sparsely populated areas, the council is pressing the Government to:

• reinstate a clear, evidence‑led weighting for rurality and remoteness
• make sure funding decisions are based on up‑to‑date and accurate data
• acknowledge the genuine cost pressures faced by rural councils

Despite these huge challenges, the council remains committed to protecting essential services, supporting vulnerable residents and investing in the district’s future. Planned investment in the next financial year includes updating community assets such as toilets, bins and benches, supporting the creation of quality housing that is affordable, enhancing markets across the district and supporting and protecting local nature reserves, woodland and wildlife habitats. 

The draft budget proposals include a combination of savings, efficiency measures and potential changes to fees and charges. They also explore opportunities to generate additional income, reduce long‑term costs to make sure the organisation continues to operate sustainably in the years ahead.

The council is forecasting a budget shortfall of £2.6m for next year, 2027/28. The council will continue to lobby the Government to recognise the cost of delivering rural services in future finance settlements.

Cllr Dan Thomas, Leader of South Hams District Council, said: “We are being open about the financial challenge we are facing as a District Council. The rising costs of delivering vital local services mean we must take difficult, but responsible, decisions to ensure we continue to support our communities.

Cllr Simon Rake, Deputy Leader and Executive Member for Finance, said: “Our priority is to protect essential frontline services wherever possible. We will continue to work hard to deliver value for money and build a financially sustainable future for the South Hams.”

Find out more where your Council Tax goes for each statutory agencies here: www.southhams.gov.uk/council-tax/about-council-tax/how-my-council-tax-spent