Oxford City Council is facing “tough choices” over the coming months as a combination of the Covid-19 pandemic and the cost of living crises hits its financial outlook.
The City Council needs to have delivered increasing levels of savings and additional income generation totalling £5.5m annually from the financial year 2026/27. That is equivalent to around 20% of its £27m annual budget.
The City Council is looking hard at scope for further efficiencies and income generation to mitigate impact on services, but the financial picture means that some council services may need to be reduced.
The work carried out by the City Council on the budget over the last year means the organisation has some time to plan for and implement any changes.
If service reductions are needed, priority will be given to protecting services that support the most vulnerable in Oxford, and maintaining a high standard of core services, such as bin collections and street cleaning.
The City Council has renewed its call for the Government to honour its commitment to “do whatever it takes” to protect local government services.
A decade of austerity
Over the last decade, Oxford City Council has seen a £7m reduction in funding as part of the Government’s austerity programme. The City Council now receives no direct grant funding from Government for its core activities.
Despite this, the City Council has maintained 17 community centres, five leisure centres, youth clubs, grants for local charities, and a raft of support services for the most vulnerable in Oxford.
This was achieved through the ‘Oxford Model’, which saw the City Council’s direct service company (ODS) sell its services – such as refuse collection, gardening, construction work and vehicle repair – to generate profit, as well as generating income from commercial properties, delivering major efficiency savings over a number of years and close working with council trade unions. The council has delivered £12m in savings and income in the last four years.
Oxford City Council is one of the few local authorities across the country that made no significant cuts to its services during austerity. It is also one of a small number of councils to retain 100% Council Tax Discount for those residents on the lowest incomes.
Pandemic and cost of living
The Covid-19 pandemic and cost of living crisis have had a significant impact on the City Council’s ability to generate income.
Oxford Direct Services had to reduce its services significantly during the pandemic which impacted its revenue; income from car parks, leisure centres and Town Hall room hire are all down; and rent from the City Council’s commercial properties in Oxford remains negatively affected. All of these income streams remain lower than pre-pandemic.
The total financial impact of the Covid-19 pandemic on the City Council over the period 2020-2026 is forecast to be £23m, with the City Council forced to use 50% of its reserves (£11m) to support frontline services.
Against this backdrop, the cost of living crisis is now developing. Alongside the increased costs of support Oxford families, inflation is predicted to hit 11% this year, meaning the cost of purchasing supplies and services will increase significantly.
Budget proposals
Oxford City Council will release its draft 2023/24 Budget and 2024/27 Medium Term Financial Plan (MTFP) in December, as normal. But the financial picture mean that the organisation has started its planning earlier this year.
Councils can legally only increase council tax by up to 1.99% each year (significantly below the predicted 11% inflation) without holding a referendum – meaning the City Council cannot readily protect services by raising taxes.
Local authorities are also required by law to operate a balanced budget. With reduced income and increased costs, this means the City Council is legally bound to reduce its costs or bring in extra income in these circumstances.
The City Council is looking hard at further efficiencies and income generation and looking at ways in which services could be delivered differently to mitigate the impact, but it is possible that some existing services may have to be reduced.
The work carried out by the City Council on the budget over the last year means the organisation has some time to plan for and implement any changes.
The City Council was understanding of commercial tenants’ difficulties during the pandemic and offered a special arrangement for those who had temporary difficulty. At this time, enforcement tools normally available to take action on arrears were also greatly reduced.
However, given the financial pressures on the City Council and the fact that shops have been able to open as normal for some months, the expectation will be that rent is paid in a timely fashion and any arrears are dealt with.
The City Council offered significant rental help to small businesses impacted by the Covid-19 pandemic, alongside facilitating £32m of Government grants and £93m of rate relief to business across the city.
Approach to budget setting
The budget setting approach for the Budget and Medium Term Financial Plan (MTFP) will be conducted through a series of service reviews looking at all areas of the City Council’s activity, with the following principles:
- Avoid incremental cuts to services
- Looking to identify additional efficiencies and income while maintaining the existing level of service
- Identifying changes to service delivery through additional investment in staffing or ICT or look at alternative delivery models which could result in additional savings or income
- Look at whether a reduced but sustainable level of service could be provided or whether the service could be removed altogether, or provided in partnership
“I have written to Government asking that ministers honour the pledge they made in March 2020 to ‘do whatever it takes’ to protect local services.
“The Government has pledged no help for local authorities with rising energy costs or the effects of inflation, and – despite the lasting impact of Covid-19 on our finances – the Government has ended its additional funding.
“Through prudent financial management, we have managed to maintain vital services in Oxford during a decade of savage cuts to local government, and have continued support to the most vulnerable.
“We have spent years generating income to offset Government cuts, and making backroom cuts and efficiency savings. Now, after a decade of austerity, there is no low hanging fruit left.
“We are looking at ways to save money and generate income to mitigate the impact and avoid needing to reduce services, but if we do not receive additional funding from the Government, there will be some tough choices to be made.”
Councillor Ed Turner, Deputy Leader of Oxford City Council
The City Council does generate income from the rent of its almost 7,800 council homes, but this money can legally only be spent on housing-related issues. It is mainly spent on maintaining existing homes and building new council homes.
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