The government has backed down in the face of a revolt by 120 rural authorities, including Wiltshire, to take legal action against “grossly unfair” reductions in their funding for vital public services.

Eric Pickles, the Communities Secretary, was warned that the 3.81 per cent rural cuts compared with reductions of 2.05 per cent in urban areas would “crucify” their activities.

And now the government says it accepts that rural areas are under-funded and will give them a boost before the start of the new financial year in April.

Andrew Lansley, leader of the House of Commons (pictured), has acknowledged that the local government settlement was a “matter of concern” to rural MPs in responding to a parliamentary question from Ian Liddell-Grainger, Conservative MP for Bridgwater and West Somerset.

Mr Liddell-Grainger had asked for a debate discuss the difference between urban money and rural money before next year’s money.

“That still presents a problem, and now is the time to discuss it so that we can get it right for next year,” said Mr Liddell-Grainger.

Mr Lansley replied: “That is a matter of concern to many members, including my honourable friends at the Department for Communities and Local Government. Ministers agree that the evidence shows that rural areas are comparatively under-funded, and that a correction should be applied so that there is proper recognition of the additional costs of delivering services in rural areas”

“I will not elaborate on the details of those adjustments, although I could do so. Although we will want to have transitional stability in local government, the government recognise that such costs need to be understood and reflected in the formula.”

Mr Lansley’s response came after more than 45 MPs called on the government to reconsider the impact its funding settlement will have on rural communities.

The situation is significant as a report by the umbrella organisation Action with Communities in Rural England has revealed that those living in the countryside will bear the brunt of Mr Pickles’ original demands.

Figures from the Office of National Statistics show that families in rural areas spend £50 more a week than urban households while research by the insurance company NFU Mutual reveal that inflation in the countryside is twice the national average.

The cost of transport is the cause of the biggest difference, rural households spending around £20 more because they have to rely in personal cars due to the lack of available public transport.

“There is no doubt that these latest government proposals are a harsh blow to those low-paid rural families who are already struggling to make ends meet,” said Nick Chase, director of policy and research at Action with Communities in Rural England.

“Countryside residents are heavily dependent on their cars due to a lack of public transport, typically having to travel twice as far to reach their nearest shops, banks and post offices compared with those living in major conurbations.

“Rural dwellers are also hit by the comparatively high cost of heating oil, which is often used as a substitute for gas, as many rural villages are off the grid.

“We are calling on the government to seriously consider the impact of benefit cuts on rural communities before rubber-stamping these proposals.”