Rural Scotland Funding: COSLA Warns Rural Areas Frozen Out of Local Growth Fund

Cllr Ricky Bell

COSLA Resources Spokesperson 

Rural Scotland Funding: Cllr Ricky Bell, Resources Spokesperson for COSLA, argues that the UK Government’s new Local Growth Fund risks undermining Scotland’s rural economies by slashing revenue funding and excluding entire regions, leaving councils unable to support jobs, skills, and vulnerable communities.

The announcements from the UK Government on the Pride in Place and the Local Growth Fund, which many see as a successor to the UK Shared Prosperity Fund, were an opportunity to support long and lasting growth for communities in Scotland. 

A Fund That Cuts as it Claims to Grow

For the avoidance of doubt, I must reaffirm that our members do recognise the potential importance of UK Government funding, targeted or otherwise, in supporting local economic development and regeneration. However, Scottish local authorities have made it very clear to us that the new funding profile represents a very significant reduction in revenue funding to local areas year to year. This puts jobs at risk and severely limits councils’ and partners’ ability to fund vital employability support, skills development, business support, and preventative economic interventions.  

COSLA firmly believe that the approach to the allocation failed to account for the real differences in need across communities, with no acknowledgement of the higher costs of living and doing business in remote and rural areas. The outcome for Scotland is unprecedented, with nine local authorities allocated nothing from a £50 million per year pot. 

Revenue Slashed, Jobs at Risk

It is not only those without an allocation that miss out. The decision to fundamentally shift to a majority capital allocation for the new funds means local authorities across Scotland collectively face a 72 per cent decrease in revenue funding from 2025/26 to 2026/27. This means many thousands of vulnerable and marginalised people could be left without access to the tailored help and support they need. 

Voluntary and community sector organisations currently involved in the delivery of these programmes will also be unable to sustain these targeted employability support services that invest in people and not bricks.

To further illuminate the differences and impact, it may be prudent to consider both the Scotland-wide and local perspectives.

Scotland-wide Perspective 

On 8^th January 2026, the UK announced that a new UK Government (UKG) Local Growth Fund (LGF) of £140 million would be distributed to five Scottish Regional Economic Partnerships (REP). The funding allocated to the REPs from the programme over the next three years (2026/27–2028/29) is:

The fund is approximately 70 per cent capital. The remaining three Regional Economic Partnerships did not receive an allocation:

The Regional Economic Partnerships not receiving an allocation are largely rural, indicating that the methodology used to allocate the Local Growth Fund in Scotland favours more urban regions. The investment was targeted at regions containing the areas with the lowest Real Disposable Household Income (RDHI) per capita. As an unintended consequence, this has produced an outcome that greatly favours urban high population-based areas over rural areas.

Local Perspective 

Among our rural and remote authorities, there is profound disappointment with the UK Government’s recent decision to curtail the Local Growth Fund. This, coupled with the exclusion of some rural authorities from previous allocations of Pride in Place (PiP) funding, is the realisation of the worst fears regarding the prioritisation of remote and peripheral areas in a post-Brexit United Kingdom.

Even for areas that appear to be benefiting from the allocation, the shift to capital constrains what we can consider investment in and means projects benefiting now will end for something that might help in several years’ time.

The UK Shared Prosperity Fund (SPF) represented a step down in financial value from the previous European Regional Development Fund (ERDF) and European Social Fund (ESF) that were in place prior to the UK leaving the European Union. The European Union previously recognised the socio-economic challenges faced by more peripheral areas and prioritised regional development funds to such areas accordingly. 

The UK Government’s decision on funding for economic growth represents a real-terms removal of this lifeline funding. This is a major oversight, and it will be perceived by the rural community as a significant lack of regard from central government. 

Rural Potential Overlooked

Rural communities in Scotland possess vast economic potential: being at the forefront of the energy transition in the UK; leading on developments in the space industry; and having strong local industries, including fishing and aquaculture. 

Communities far from the central belt require bespoke support in order to stimulate growth. The decision to base allocation methodology on household income indices simply ignores the higher costs of living and doing business faced by rural, remote, and island communities in Scotland.

This comes alongside another very poor settlement that fails to address the dire financial situation of local government in Scotland. This means that councils are, at present, having to make difficult decisions and present proposals for cuts to services across the country. 

This article features in the new edition of ChamberUK. Our parliamentary journal.

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