Oxford City Council: how to lose £1m without really trying

Council finances are a labyrinth inside a maze inside a vortex. In the first year I was a councillor, I'm not sure I understood a single word of the Council's budget discussions. (It's possible I may have neglected to mention this fact in my Focus leaflets at the time.) I've cottoned-on a bit more since then, which is just as well as these days I chair Oxford's Finance Scrutiny Committee. To prove it, let me casually drop in some big numbers.

The Council has a net revenue budget of roughly £25m which it can spend on local services. That's a lot of money in an absolute sense, but not so much by comparison: it represents just 0.029% of the £85 billion spent by councils in England and Wales.

Which means that the city's political parties get to have spirited annual debates asserting that our respective group's budget is the only one which adds up and delivers local people all their heart's desires. While our opponents' budgets will bankrupt the city, and provoke such a wailing and gnashing of Council Tax-payers' teeth as Oxford has never before known. But no matter what our political hue, we are all dependent on the Council's officers to translate the budget from paper into reality.

In the most recent budget, set last February, the Council's officers recommended to councillors that £1.6 million of savings could be made in time for the 2006-07 financial year. Thank you, we said. The Labour administration, and the Lib Dem and Green opposition parties all adopted these savings (more or less, anyway. We made sure there were a few differences to ensure the voters could distinguish between us.).

But experience has taught us to be sceptical. So the Finance Scrutiny Committee asked the Council's chief financial officer to report back to us in June what progress was being made in making these £1.6m savings happen. He did so, clearly and concisely: very little. Indeed, reading the progress column was like wading through treacle in a heavy fog: "further work", "investigative work", "exploring" and "inconclusive" were the phrases depressingly strewn across the page, and with virtually no action timetabled.

In stark contrast - it would be comical if it weren't for real - all the £1.7m spending proposals are proceeding like billy-oh: "all employed", "recruitment complete", "job descriptions ready", "staff and budgets transferred", etc, with detailed timetables. This in spite of the clear injunction that unless officers achieved the savings they had promised their spending proposals would not be approved.

The cross-party Committee was not impressed, and we asked for a formal assessment to be reported in September. Yesterday, in fact. When we discovered some progress had been made: that £590k of the promised £1.6m savings looked like they might be made. Which only leaves a short-fall of a little more than £1m. (You can read the 4-page report for yourself here.)

Now a £1m 'black hole' in a budget of £25m is pretty serious. Or is it? This should be a simple enough question, but in the illusory Wonderland that is local government finance, smoke and mirrors are all important.

First, it's possible the City Council will receive a £400k windfall saving on the cost of Oxford's concessionary bus fares for senior citizens - currently funded from Council Tax - because the Government has promised to fund a national scheme. (As usual, Gordon Brown is being very unforthcoming about what money really will be available.)

Secondly, every year the Council under-spends its £25m budget. This year, the under-spend is currently projected to be £315k, but I confidently predict it will be much more than that once the final accounts are reconciled. So a gaping budget aperture of £1m is patched up with a band-aid, and the Council is able to struggle on, injured but alive, for another year.

It is just this resigned-to-reality attitude which sadly governs too much of the Council's financial thinking. Each year we muddle through, so all is fine. It isn't. A Council which, year after year, relies on one-off windfalls and under-spends may be financially stable, but that most certainly does not mean it is well-managed. A Council which year after year proves itself to be more adept at spending than saving is simply putting off the day when cold, hard reality comes knocking on the door. This is a Council which is wallowing in deferred failure.

And that is pretty much what the Finance Scrutiny Committee unanimously agreed. We have urged senior officers to get a grip on their departments, and not simply to accept that savings which, just six months ago, were achievable are now utterly impossible. This is quite simply too important an issue for councillors to roll over and play dead. Savings are not simply a way of ensuring a budget balances: they are necessary for the Council to be able to afford its priorities, providing the people of Oxford with the services for which they have paid.