Devon County Council (DCC) faces a possible £10 million hit to its budget after the government moved to scrap a major grant to rural councils.

Last week, James McInnes, DCC’s Conservative leader, addressed the full council to reveal that the rural services delivery grant was being axed, with a potentially huge impact on the authority’s finances.

The grant provides funding for services in sparsely populated areas, but the government has said it is redirecting the cash towards more deprived areas to create a fairer system.

Devon currently receives just over £10.1 million of a £104.6 million the grant provides to local authorities in England. An additional £4 million for the county’s districts was announced in the autumn budget.

A new payment is being launched in its place, but it is unclear how much Devon will benefit.

Cllr McInnes argued that the move is “another assault on rural communities where services cost much more to provide because of their sparse nature”.

He said the authority had been on track to produce a balanced budget for the 25/26 financial year, but that the government had “thrown a spanner in the works”.

He continued: “The government has decided to cut the rural services support grant and wrap it up in a new settlement in relation to areas of deprivation, which Devon has never scored well on.”

Cllr McInnes acknowledged that, at this stage, he did not know if the government would provide any alternative cash.

The announcement comes as the council awaits the so-called local government settlement, which is the funding authorities receive from Westminster to help fund services.

“We are facing an immediate challenge to offset the loss of this grant,” he added.

“We are obviously urgently exploring all options across all departments, but this means we will not be able to produce a target budget for next week’s cabinet meeting. Instead that will now come before January’s cabinet.”

Cllr McInnes, who also criticised the government for introducing the inheritance tax proposals for farmers as well as hiking National Insurance employer contributions, said Devon had to maintain one of the biggest road networks in the country, adding that its bill for getting children to school is also one of the highest nationally.

South Hams District Council (SHDC) leader Julian Brazil said the loss of the grant was one of the reasons why the council was considering hiking car parking charges for the first time in four years.

He said: “We have to increase car parking charges or we cut services. The grant is worth a lot of money to us, as services such as rubbish collection cost more to deliver in a rural area.

“We apologize that we have to do it, but everyone knows that costs are spiralling, and the council isn't immune to that, and when you get cuts from central government, it's a double whammy.”

Cllr Carol Whitton (Labour, St David’s and Haven Banks) agreed that the cut to the grant was a “major concern”.

She said: “It is something across all parties that we are deeply concerned about.”