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ITEM OF URGENT BUSINESS

CABINET – 16 JANUARY 2007

POTENTIAL PROPOSAL BY OXFORD CITY COUNCIL FOR UNITARY STRUCTURES IN OXFORDSHIRE

Report by the Chief Executive

1. Oxford City Council has indicated that it intends to seek unitary status under the provisions of an invitation to councils issued by the Department for Communities and Local Government (DCLG) in October 2006.
2. The City Council is awaiting an assessment of the financial viability of its proposal and is expected to meet in the week commencing 15 January 2007 to consider advice from its consultants. An update will be provided to the Cabinet at the meeting on 16 January 2007.
3. On 9 January 2007 the County Council agreed the following recommendation from the Cabinet :

• to oppose vigorously any bid for unitary councils, based on one or more districts in Oxfordshire, which would result in the abolition of the County Council;
• to support an enhanced two-tier model of local government with an invitation to the five District Councils in Oxfordshire to embrace the concept enthusiastically but not to pursue a Pathfinder bid for the reasons set out in the Appendix to the [Cabinet] report;
• to call on district council partners to sign up to the principle of radical changes in the two-tier system for implementation over a three-year period;
• to note the Secretary of State for Communities and Local Government has issued an invitation to local councils to make proposals for future unitary structures by 25 January and to authorise the Leader of the County Council to approve a formal response to the Secretary of State which:

1. defines why the two tier system of local government best fits the county’s needs;
2. comments on any sub county unitary bids; and
3. sets out a framework for improving value for money and customer service within the existing two tier local government system.

4. Proposals under the DCLG invitation must be received on or before Thursday, 25 January 2007. It is unlikely that the details of the City proposal will be available before this date. Proposals will be subject to an initial assessment by DCLG to ensure that they conform to the terms of the invitation.
5. DCLG has said that proposals for unitary structures must be affordable - ie the change itself must represent value for money and be met from councils’ existing resource envelope - and supported by a broad cross-section of partners and stakeholders
6. At the end of March 2007, the Government will announce which proposals will proceed to stage 2, which will include (a) consultation with partners and stakeholders in the area affected by the proposal and (b) the checking of the financial case by the Audit Commission. Final decisions would be announced in July 2007.

Key Issues for a City proposal

7. Any proposal by the City Council to create unitary structure(s) in Oxfordshire will need to address the following issues:

Cost

8. DCLG has said that the overall transitional costs of any proposal must be more than offset by savings over a payback period, which should be no more than five years. Any costs incurred must be met locally without increasing Council Tax.
9. The County Council has estimated that the cost of creating three unitary councils in Oxfordshire - based on Oxford City, West Oxfordshire/Cherwell, and the Vale of White Horse/South Oxfordshire - would be an extra £53.8m. In addition there would be ongoing annual costs of £18.5m. The "three unitary" model is the most expensive of the possible unitary models for Oxfordshire.
10. There would never be a financial payback and there would be a very significant rise in Council Tax bills throughout Oxfordshire.
11. The approach used by the Council to produce these figures has been checked by accountants PricewaterhouseCoopers who found it to be both consistent with their work with other authorities and reasonably balanced.
12. The only information currently available on the financial case for the City Council’s potential proposal is a report commissioned by the City last year from Rita Hale & Associates & Management Perspectives. This considers the "fiscal effects" of setting up a unitary city council but does not directly address the costs of change. It does however note that "Oxford is ... considerably below the 250,000 minimum population that some commentators have speculated will be required for unitary status" (paragraph 2.6).
13. The "fiscal effects" deal with:

• the share of the existing spending on county council services which would become the responsibility of a new unitary Oxford City;
• the Council Tax currently paid in the City for County Council services, which would become income for a new unitary Oxford City;
• the share of the formula grant currently paid to the County Council, which would also become income for a new unitary Oxford City.

14. Taken together, these "fiscal effects" are likely to have different impacts on any new or continuing authorities. Overall, they should have a neutral effect within the reorganised area - thus a formula grant gain by one authority is a loss for another. "Fiscal effects" do not change the overall cost of reorganisation, but they affect where the costs fall.
15. The "Rita Hale" report attempts to disaggregate the county council’s budget between the city and the rest of the county. Many assumptions are made in order to do this and the County Council was not consulted about the process. In practice it can be extremely difficult to disaggregate budgets between different areas – for example, facilities located in one district council area (such as libraries) are often used by people from other areas.
16. It is relatively easy to calculate the amount of Council Tax raised by the County Council in the City but calculating formula grant is a very complex process. Therefore, estimates have been made, because not all the data needed is available.
17. A related issue is that, as an education authority, a new Oxford unitary would receive an education fixed cost allowance in its relative needs figures, worth £0.435m. The Government could fund this by adding extra formula grant, but there is no suggestion that they would do so. If there is no additional government funding, the costs will be distributed to other authorities, which could include those outside Oxfordshire. It is thought to be unlikely that there would be any additional external support for this allowance, and therefore it should be assumed that this gain in Oxford City would have to be borne by the remainder of the county.
18. The "Rita Hale" report concludes that Oxford City would be £1.1m better off as a result of "fiscal effects" (including the effect of becoming an education authority). However given the difficulties of calculating the figures and other reservations, the County Council considers that the figure of £1.1m should be considered to be the central point of a wide range.
19. This £1.1m "fiscal effect" is not enough to offset the ongoing costs of reorganisation, which we estimate will be £8.0m for the City. The inclusion of the "fiscal effect" simply reduces the ongoing costs to £6.9m. These ongoing costs would produce a 12% increase in Council Tax in the new unitary City itself, over and above the transitional costs.
20. The transitional costs are estimated at £12.1m for the City. This is equivalent to a 22% increase in Council Tax for one year, although in practice it would be spread over several years.
21. If the rest of the county remained two-tier, it would be faced with transitional costs of £8.8m, equivalent to a 5% increase in Council Tax, plus an ongoing increase equivalent to a further 1%.
22. In a three unitary model, the transitional costs for the two new unitary authorities outside the City would be £41.7m (ie £53.8m less the £12.1m for the City) with ongoing costs of £11.6m (£18.5m less £6.9m for the City). The increase in Council Tax for the remaining county area would vary from district to district, ranging from 20.2% to 19.4% for transitional costs and around 5% - 6% for the ongoing costs.

Value for Money

23. DCLG has said that proposals for unitary status must deliver value for money.
24. Currently, Oxfordshire County Council is ranked "good" by the Audit Commission and is receiving improving ratings all the time; it is expected to achieve the top "excellent" ranking shortly.
25. In contrast, Oxford City Council is judged by the Audit Commission to be one of the worst-run district councils in England, with a ranking of "weak", and is in the lowest 16% of performers among the 238 district councils in England.
26. Within the south east, Oxford is one of only 4 "weak" authorities. It has been ranked in this way since 2004, while the County Council’s performance has improved steadily year on year.
27. Oxford City Council is in the lowest 9% of district councils nationally for Value for Money – only 21 out of 238 district councils have such a low score; and in the lowest 7% of district councils nationally for its Use of Resources (i.e. financial management) – only 17 out of 238 district councils have such a low score.
28. It levies the 10th highest Council Tax of all district councils in the country and a number of its services – including Recreation & Sport, Environmental & Public Health, and Housing – are among the top three most expensive in England.
29. The City Council’s own Executive Board member for better finances, Councillor Stephen Tall, has stated: "It is generally acknowledged the City Council is overall a high cost, low performance council" (Oxford Mail, 9 November 2006).
30. There are also significant problems faced by small unitary councils generally. In the last local government review, even well-performing small councils which became unitaries were found to have significantly underestimated the challenges involved in taking on the massive additional responsibilities involved in delivering education and social care.
31. As well as the direct costs of reorganisation, the creation of small unitary councils is likely to result in duplication and inefficiency. Statutory senior management posts such as a Director for Children’s Services and a Director for Adult Services would need to be created in each Council.
32. Many specialist services – including, for example, special educational needs and home to school transport – are not viable in a small unitary council and elaborate joint arrangements need to be re-created, leading to more bureaucracy rather than less.
33. In Oxfordshire a move to three unitaries would disrupt existing partnerships, particularly with the NHS where the Primary Care Trust is coterminous with the County Council.

City and County

34. Oxford’s population is less than 140,000. Its boundaries are highly permeable and the city and the county are significantly interdependent. In a number of key respects, most of Oxfordshire operates as a single sub-region centred on Oxford.
35. The Oxford travel to work area covers most of the county and embraces a much wider geographical area than many others in the south east. 34,000 people travel into Oxford to work from outside the city and 65% of people using the Central Library in Oxford have a postcode outside the city boundary.
36. The South East Plan identifies the Central Oxfordshire Sub-Region – which covers a substantial part of the county with Oxford as its hub – as the engine for the local economy. Oxfordshire’s principal businesses – for example the bio-tech, publishing and science industries – are spread right across the county and both universities have faculties, laboratories and campuses outside the city boundary.
37. Research for the South East England Regional Assembly (SEERA) has attempted to define housing market areas in the south east. Again, Oxford’s housing market area extends very widely. As with the travel to work area, it covers most of Oxfordshire, even extending slightly beyond the county boundary in some cases.
38. The main road and rail networks within the county centre on Oxford itself but there are also routes which are important parts of regional, national and international networks. The complexity of the inter-relationships between the local and wider transport networks is illustrated by the fact that the A34, part of the European main road network, is also for part of its length the Oxford ring road.
39. The Park and Ride system was developed over 30 years ago as a way of helping to protect the centre of Oxford from the impact of traffic growth. Three of the five Park and Ride car parks (Peartree, Seacourt and Redbridge) are located within Oxford City while two (Water Eaton and Thornhill) are located beyond the city boundary in Cherwell and South Oxfordshire respectively.
40. The Green Belt, whose purpose is to protect Oxford and its setting and guard the surrounding countryside from encroachment, extends over a substantial part of central Oxfordshire and includes land in all five district council areas.
41. Within this context Oxfordshire County Council currently delivers a wide range of high quality services to Oxford residents, among them:

• Education and other children’s services to over 14,300 Oxford children and young people
• Social Care to 3,740 Oxford adults
• Seven libraries in the city with 82,000 registered borrowers making 1.15m visits per year
• £630k worth of subsidies to Oxford City bus services
• Millions in funding for city transport improvements
• Fire and Rescue response to almost 3,000 emergency calls annually
• The Redbridge Waste and Recycling Centre, which receives 300,000 visits a year
• Disposal of approximately 35,000 tonnes of Oxford’s waste every year
• Repairs to the city’s river towpaths
• Support for major city regeneration initiatives such as the Oxford Castle and West End projects
• Trading Standards advice to almost 3,400 Oxford consumers
• Support and supervision to 700 Oxford young offenders
• Support to 12 family and children’s centres and seven youth clubs within the city
• Music tuition to more than 1,000 Oxford children each week
• More than 500 civil weddings in Oxford every year

42. The Cabinet is RECOMMENDED to ask the Chief Executive to keep members informed about the progress of any proposal by Oxford City Council to create unitary structures in Oxfordshire.

JOANNA SIMONS
Chief Executive

Contact Officer: Hilary Simpson, Corporate Change Manager, 01865 815487, hilary.simpson@oxfordshire.gov.uk

January 2007

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