Oxford City Council financial update and strategic response to coronavirus

These are expected to involve cost restraint in the current year and a review of all capital spending projects to prioritise what can be taken forward within the available budget.

It will also examine the challenges and opportunities arising from the Council’s response to COVID and work underway as it transitions from the emergency response phase, through to restart, recovery and renewal for the city as a whole.  

Financial shortfall

In February 2020 the Council agreed a balanced budget and Medium Term Financial Plan (MTFP) over each of the four years commencing 1st April 2020. Since then, along with other local authorities, Oxford City Council has seen a significant reduction in income streams and increased expenditure in the current financial year, and is forecasting significant impacts over the next three years. The total financial shortfall due to COVID is estimated at £24 million, of which £9.4 million is in the current year. 

The funding gap comprises increased costs of £1.5 million arising from response to COVID. However, the bulk of the deficit is as a result of a shortfall of income mainly from commercial property rents, car parks, Town Hall and community centre bookings, leisure centres, and reduced income from its wholly-owned companies Oxford Direct Services Ltd (ODS) and Oxford City Housing Ltd (OCHL), both of which have seen major lines of work halted.

The Council has received £1.6 million of direct Government COVID-related grant support to date; however this clearly doesn’t cover the funding gap.  The Council Leadership has called on Government to honour its commitment made in March to do ‘whatever is necessary’ to help councils manage the financial fallout from coronavirus.

The position in other local authorities is similar, with a £100 million funding gap across Oxfordshire’s six councils, and a total £13 billion shortfall across England according to the Local Government Association.

Mitigating actions

As it is uncertain what further funding will be made available by Government, the Cabinet will be considering proposed measures to mitigate the financial impacts. These include cost restraint in the current year, which will involve not proceeding with some of the earmarked additional expenditure agreed in the February Budget.

Programmes to tackle climate change will be revised to accommodate the new funding position, though the ongoing £100 million capital investment programme on low carbon measures will continue. The Council remains committed to becoming a Zero Carbon Council and city.

Staff not able to fulfil their roles or redeployed have been furloughed - up to 40 at any one time in the Council and around 200 in ODS.

The majority of capital programme work has been paused during the lockdown period. A review of all capital expenditure projects is now proposed before any are restarted, including a number that had already received Council approval.

It is proposed that those projects that are not financially driven, or are required for health and safety reasons, or are externally funded will remain paused until the Council-wide financial position is clearer, at which point a decision on whether or not to proceed in each case can be taken against competing demands for Council resources. These projects include the replacement of Bullingdon Community Centre, the redevelopment of East Oxford Community Centre both of which have had strong backing from Members and which the Council would want to deliver if it is financially possible to do so.

Even with some of the mitigations outlined above, without further action the Council is likely to face a deficit of £9-10 million in the current financial year 2020-21. The Cabinet will be considering using reserves to plug this gap, while noting that the use of reserves is one-off measure: once they are gone, they are gone.

The Councils Housing Revenue Account, which covers income and expenditure on council housing and is ring-fenced, is not under the same financial pressure as the General Fund and no significant adjustments are being made at this time.

Strategic response

In February, the Council approved a new Corporate Strategy confirming its vision to build a fairer, greener city in which everyone can thrive, with four key aims to enable an inclusive economy, deliver more affordable housing, support thriving communities and pursue a zero carbon Oxford.  The COVID pandemic presents new challenges to achieving these aims, particularly in terms of the unequal health and economic impacts on different communities.

The Bank of England has forecast the worst recession for 300 years with up to 25% contraction of the economy. Unemployment is expected to be sharply higher, with up to 22,000 (19%) of jobs in Oxford at risk, according to the RSA. Good Food Oxford has reported that demand for food larders and food parcels are up three-fold across the county since March.

The Council responded rapidly to the lockdown requirement and made necessary changes to its services. This has meant almost all council staff working from home, stopping or restricting many areas of work, and a significant redeployment of staff to deliver the new services created to support vulnerable people.

The Council is now in a transition phase. While lock down restrictions are gradually being lifted, a return to a pre-COVID “normal” is not practically possible, nor affordable in the current circumstances.

The response to COVID has yielded some positive developments by forcing a step change in the way the Council delivers services in some areas and in closer working with community and voluntary groups. The Cabinet will study the opportunities to capture learnings and embed ways of working that have delivered efficiencies and better outcomes for residents and communities. It will also consider how best to support economic recovery such that it is both inclusive and sustainable – to “build back better”.

Key areas of short term and long term focus

The Cabinet will review progress of work already underway across seven areas that are considered a priority for the Council and the city, both in the short and longer term.

• Supporting the local economy and jobs, and helping to secure long term investment to support sustainable and inclusive growth
• Measures to support the reopening of the city and local centres to enable social distancing, with longer term improvements to public realm and transport to support increased cycling and walking
• Tackling increasing hardship and homelessness anticipated as a result of the economic impacts; and supporting vulnerable people from COVID and over the longer term
• Delivering services differently through embedding new ways of working particularly across our locality areas, while undertaking fundamental reviews of leisure, cultural and community services. Planning for potential further COVID outbreaks
• Cost management and resetting business plans for the Council’s wholly-owned companies, ODS and OCHL, together with a full review of all planned capital expenditure and other initiatives to prioritise what can be taken forward within the available budget. Updated corporate business plan and budget is planned for the autumn
• Continue to support remote and flexible working by staff, and review how we work and where people will be based longer term
• Continue to work with our partners in public health, health and social care to promote and protect health and wellbeing of the population

The Council’s approach to these work streams will be to embed and build on positive changes that have emerged in the way we work across the council, and with our communities, volunteers and other partners. Prioritisation will be given to retaining or enhancing environmental benefits wherever we can; targeting resources to support those most in need or most vulnerable; ensuring equality, diversity and inclusion are embedded; working with citizens, voluntary and community groups to develop people-focused solutions; investing in staff and services; transforming services to deliver value for money and better outcomes.

"Our financial situation is extremely challenging, and it is disappointing in the extreme that central government is so far off helping local authorities in the way it initially said it would: around £1.6 million of extra help is welcome, but is a drop in the ocean compared to £24 million of projected losses. Oxford’s situation is made more acute because we have worked hard in the past to generate income, for instance through our excellent wholly-owned company Oxford Direct Services, rather than cutting services. Sadly some of those sources of income are badly affected by Covid.

"We want to harness some of the things we have learned in this pandemic: such as how communities can rise to the challenge of helping those in need, how there is great potential to increase cycling, and about different ways of delivering council services. 

"We are committed to bringing things back on an even keel, working with our outstanding workforce, represented by its trade unions. We should be able to meet some of the one-off costs because we have a prudent level of reserves, but there are likely to be some difficult decisions in the coming months in order to give us a balanced budget in future years. Many of the impacts of this pandemic will, sadly, be felt for years to come. "

Councillor Ed Turner, Deputy Leader and Cabinet Member for Finance and Asset Management