Oxford City Council Proposed Budget 2022/2023 and Medium Term Financial Strategy

Published: Wednesday, 8th December 2021

Oxford City Council is announcing plans for a balanced budget over the next four years.

This is despite the continued significant impact of the COVID-19 pandemic on several of the Council’s income streams and areas of expenditure, and a shortfall in the funding received from central Government to offset this.

The impacts of the pandemic on the local economy and Oxford City Council itself continue to be extremely challenging. The Council has seen a sharp increase in expenditure to support those in need, together with a second year of reduced in revenues from its core income streams. Income this year is expected to be £500,000 below normal from the Council’s leisure centres, £850,000 lower from town hall room hire, £1.5 million down from car parks and £3.74 million less in rents from commercial premises. Earnings from the Council’s wholly owned companies Oxford Direct Services Ltd (ODS) and Oxford City Housing Ltd (OCHL) have also been impacted by difficult trading conditions over the course of the pandemic.

The total financial impact of the COVID-19 on Oxford City Council over the period 2020-2026 is forecast to be £23 million. To date, the Government has provided around £11 million of financial support to the Council in respect of its day to day service delivery. A further £4 million has been provided by Government to support the provision of additional measures to support residents and businesses impacted by the pandemic. As a result of the funding shortfall, the Council has had to draw on £11.3 million of its £22 million of accessible reserves, and it is now reviewing all key income streams to take a prudent assumption on the future impact of COVID 19.

The Council is also identifying proposals to reduce expenditure, increase income and transform services to deliver efficiencies.

In total efficiencies of £16.1 million are planned for the four year period of the Medium Term Financial Strategy (MTFS) – 2022-2026. Actions will include reducing office space and supporting remote working to enable the letting of two floors of the Council’s offices at St Aldate’s Chambers; provide more digitalisation of the Council’s services and going cashless, reviewing ICT data storage and software licences, and the delivering efficiencies in the homelessness service as a result of countywide changes to provision.

The Council has also had to make difficult choices including a £200k reduction in its £1.7 million community grant funding budget from 2022-23, while seeking to minimise the impact by supporting organisations to operate more efficiently or access alternative funding streams. Parking charges will increase by 50p per hour in city centre carparks and 20p per hour in suburban carparks, but charges in Oxford’s five Park & Rides will be frozen.

Nevertheless, despite the financial challenges the Council is proposing to maintain full council tax support for those on the lowest incomes, protect its Youth Ambition programme that helps disadvantaged 11-19 year-olds, rebuild or refurbish three community centre, continue with its programme to deliver over 1,000 new council houses and continue to invest in decarbonisation measures to enable Oxford City Council and Oxford as a whole to progress to net zero carbon emissions.

Oxford City Council also continues to coordinate the citywide response to the COVID-19 pandemic. To date the Council has distributed nearly £1 million to support vulnerable households, £132 million to help impacted businesses and support the wider economy, plus £8.6 million over the past two years to house and support rough sleepers.

The reports on the Budget and MTFP will be considered by the Cabinet on 15 December. A public consultation on the Budget will open on 16 December on the Council's website.

Council Tax

The Budget 2022/23 proposes a Council Tax increase of 1.99 per cent, which for a Band D Council Tax charge equates to £6.37 per annum bringing a total charge of £326.54 per annum to fund Oxford City Council.  Separate Council Tax precepts support Oxfordshire County Council, Thames Valley Police and Crime Commissioner and - for residents in Blackbird Leys, Old Marston, Littlemore and Risinghurst & Sandhills Parish Councils.

Measures in the proposed Budget for 2022/23 and MTFS 2022-26 include:

Enable an inclusive economy

  • £20 million for regeneration of property within the city
  • £9 for the refurbishment of properties at Cave Street for lettings to small businesses for offices and studio units
  • £6 million of Housing Infrastructure Fund (HIF) capital to support the delivery of development at Osney Mead by contributing to the Oxford Flood Alleviation Scheme (OFAS) and walking and cycling improvements; and £6 million of Oxfordshire Growth Fund grant to fund construction of Osney Bridge

Support thriving communities

  • Redevelop and improve three community centres – Bullingdon, East Oxford and Blackbird Leys
  • Maintain the full council tax relief for those on low incomes
  • Fully fund our youth ambition programme for young people
  • Continue to provide £1.5 million of grants to community groups and charities

Deliver more affordable housing and tackling homelessness

  • OCHL building 1,100 new council houses over the next decade
  • Planned introduction of a Selective Licensing Scheme for privately rented housing from 1 April 2022 to deal with poor property conditions
  • £51m of planned maintenance, refurbishments and estate improvements to the existing stock of 7,664 council houses over the next four years
  • 22 units at Alice Smith House to be used for the housing of homeless families

Pursue a zero carbon Oxford

  • Completion of the £14 million programme of decarbonisation works across the Council’s leisure centres and £2 million investment in the Ray Valley solar farm
  • Investment of £8.7 million over the next 4 years to improve the energy efficiency of those council homes that need it the most
  • Completion of the Energy Superhub Oxford, the largest public electric vehicle (EV) charging hub, and delivery of an EV Infrastructure Strategy for Oxford

The Oxford Model

Oxford City Council’s approach is underpinned by the ‘Oxford Model’, in which it seeks to in-source work and retain the associated revenues to support the services it provides, rather than outsource to others. These income streams have helped the Council avoid the cuts imposed by many other local authorities through the years of austerity as Government grant funding was reduced and removed. The Council’s two wholly-owned companies are central to this.  Oxford Direct Services has been severely affected by COVID-19, but still aims to deliver £12 million in dividends to the Council over the next four years.  Oxford City Housing Limited is being funded to deliver 1,829 homes over the next decade including 1,114 new council homes, and make payments of interest and dividends to the Council totalling £25 million over the next four years. 

Minimum Revenue Provision

The Council is aware of potential changes to the rules on lending to its wholly owned companies, currently being considered by Government, which could have a significant impact on its finances, potentially as soon as the 2022-23 financial year. The Department for Levelling Up, Housing and Communities (DLUHC) is currently on consulting on Minimum Revenue Provision which governs councils’ accounting arrangements for repayments of loans. Under the Oxford Model, the Council provides significant lending to both its wholly-owned housing company Oxford City Housing Ltd (OCHL) and direct services company ODS Group. The outline Government proposals could result in a requirement for significant funds to be set aside in the form of provisions in the event of default by one of these wholly-owned companies. This could result in reduced funds available to support the delivery of Council services or reduced delivery of new housing. The Council is engaging with other councils and the Local Government Association to seek to persuade the Government to defer the implementation and to offer exemptions to protect housing delivery.

Councillor Ed Turner, Deputy Leader and Cabinet Member for Finance and Asset Management, said: Our budget situation this year is extremely challenging.  The principal reason for this is the fallout from the pandemic, which continues to have a profound effect on the Council’s finances.  We still have businesses struggling to pay rents for their premises owned by the City Council, the trading activity of Oxford Direct Services has been affected, the leisure services in Oxford have seen fewer visitors (as they have nationally), and room hire income is also down.  As a result of this, at the start of the year we already planned to use £11 million of our reserves – almost half the useable reserves held by our Council, to handle the consequences of the pandemic. 

“Regrettably, while government support for local authorities has been welcome, the design of government schemes has left Oxford City Council particularly exposed.  No compensation has been offered for reductions in commercial income (such as from our historic property portfolio, with holdings such as the covered market), nor for reductions in income from companies.  Yet we rely on these sources in Oxford to fund services: the essence of our Oxford Model has been to develop income streams to replace government funding which was cut.

“On top of this, we face some new pressures.  The first is a potential change to government accounting rules, which would severely restrict our ability to lend money to our wholly-owned companies.  We have had to set money aside to address this possible change.  The government is still considering a move to “fairer funding”, which would cost our council over £2 million a year.  We face additional costs because of the recent increase in employer’s national insurance contributions, as does Oxford Direct Services. 

“To address these challenges, we have been looking hard at ways to increase our efficiency, and mitigate these pressures without cutting front-line savings.  Our proposal to reduce our office-space has been further developed, and we propose a range of additional “transformation” savings, for instance on procurement and ICT.  However, inevitably there are also some difficult choices to be made in this context – we have tried to ensure that the burden of service reduction does not fall on those that can least afford it.  The coming months should provide greater clarity about the change to government accounting rules and local government funding arrangements, and further difficult decisions cannot be ruled out.

“It is important not just to focus on changes to the budget, but also on things that will continue to be funded.  We continue to be committed to implementing the outcome of the citizens’ assembly on climate change; we propose to continue full council tax relief for those on low incomes; we continue, in full, our youth ambition scheme; we retain in full our network of community centres, including three new builds; we retain generous funding for our not-for-profit sector (for instance, our local advice agencies).  We also so determined to address Oxford’s housing crisis, which is why there is funding for a massive council house building programme, with over 1,000 new council homes to be built in the next decade. 

“This remains a worrying time for our Council, and our city.  We are very grateful to our excellent workforce for all they do to deliver council services, at a time when they are needed more than ever before.”

Following the Cabinet meeting, the Budget will go out to public consultation on 16 December 2021 until 31 January 2022, with the final decision to be made by Council on 16 February 2022.

The Cabinet paper on the Budget is available on our website.