Services in one of the UK's rural regions may suffer next year despite a rise in government funding, a council has warned.

One area of the Cotswolds in Gloucestershire says it received disappointing funding in the recent government package for local authorities, despite being amongst the most deprived rural areas in the country.

The government announced on Thursday that all English local authorities will receive an increase in grants for the coming financial year above inflation.

Cotswold District Council saw its aid increase by 3.2%, just above the minimum and below half the average for district councils.

Funding for the county will rise by over 7%

It said �2m on staff and services will be cut over the next two years.

In a statement to BBC News Online, the council said: "The extra money will not compensate the council for the extra costs it will incur.

"The new way of calculating grants has put a greater emphasis on deprivation, the proportion of residents from ethnic minorities and how densely populated an area is."

The council also claimed there has been a shift in grant support to areas with a lower tax base.

Raw deal

Aid in Gloucestershire as a whole increased by 7% - over �20m - which pleased campaigners who have long argued the county gets a raw deal.

A spokesperson for the Office of the Deputy Prime Minister said: "We are looking at a fairer settlement across the UK as a whole.

"Cotswold District Council will have an above inflation increase in funding of �156,000 next year.

"People in the district will also benefit from the rise in funding in Gloucestershire as a whole, which will benefit services like health and education in the county."