The City Council Labour Group has just published its draft budget for the 16/17 year and the financial strategy for the three years thereafter.
This is an extremely challenging budget to set, at a time when local government, yet again, faces exceptional pressures due to declining government funding, increasing pressures on services and continued low interest rates. The most significant changes in this budget, however, come in the area of our Housing Revenue Account (HRA) – rented income from council housing. Previous plans for the HRA, which included an ambitious programme of new build housing, have had to be substantially scaled back due to the negative effect of several government policies, costing us tens of millions of pounds in the coming years, and greatly increasing risk to the authority.
The Chancellor’s Autumn Statement announced a further 24% reduction in the central funding of local government until 2020. This comes on top of substantial reductions in recent years. We fully expect restrictions on the raising of income locally, through council tax, to continue. At the same time, the Council faces financial pressures through low interest rates, hitting our investment income, just like any other saves, and we also face increasing pressure on our services. The greatest such pressure is the rise in homelessness: it is now almost impossible to find a property in the privately rented sector affordable at housing benefit levels, putting local families unable to access scarce social housing in a difficult position. We need to invest some £5 million, on top of recent property purchases, in an innovative scheme to purchase properties for use as temporary accommodation, but have also had to increase our homelessness budget by £200,000 per annum.
These central government cutbacks are not leading us to make big cutbacks at the frontline. Unfortunately, some charges need to increase, though we have tried to keep such increases to a minimum. We have had to put some elements of our capital programme onto a reserve list, as funding cannot be guaranteed at this stage, although we are quite confident that they will be able to go ahead if anticipated capital receipts are realised.
Various important initiatives are intended to continue, with the aim of making Oxford a fairer, more equal place to live. For instance, we remain fully committed to our spending to support the local community and voluntary sectors, and our support to prevent homelessness has been preserved for the entirety of our Medium Term Financial Strategy. We will continue to fund - in full - reductions in council tax for those on low incomes, rather than pursuing those on the lowest incomes for council tax bills that they cannot afford. We have an agreement with trade unions to avoid compulsory redundancies, we will continue to pay the Oxford Living Wage, and we will ask the same of our contractors and suppliers. Our capital programme still contains significant investment in our assets and, importantly, we are not increasing the cost of access to leisure services for those on low incomes.
Unfortunately, our Housing Revenue Account (council house rent account) is being hit by a “triple whammy.” Rather than rents increasing, the government is requiring us to reduce rent each year; we will be required to make a payment to government, of an as-yet unknown amount funded, the government expects, by the forced sale of “high value council housing”; in addition, the government expects us to charge up to market rents to tenants on household incomes of over £30,000 a year, handing the extra money straight back to government. In our rent income, these changes add up to over £33.6 million over the next few years – but this deficit is likely increase substantially with the proposed “levy”. Therefore, we have had to review our HRA capital programme and in particular are now proposing that the new affordable homes at Barton are delivered either by a council-owned housing company, the feasibility of which we are urgently investigating, or by a housing association. Similarly, we do not propose to undertake council new build at this time, and will instead look to other routes to see new affordable housing developed.
To us, these Tory changes are a deliberate attempt to render council housing unviable, and in effect kill off social housing for ever. We will lobby the government to change its mind: Oxford has a desperate need for more council housing, not less, and it is likely the extra money handed to government will leave the city for good, rather than seeing new affordable housing delivered here. The changes run counter to the needs of local employers, who tell us every day of their difficulty recruiting and retaining staff due to the housing shortage, but also of course to local people in need of somewhere to live at a price they can afford. We will continue to look hard at ways to increase the availability of housing, especially affordable housing, but these government changes make it much more difficult to do so.
Finally, we would warmly encourage Labour members to feed back to councillors (and indeed respond on the official consultation when it is published), as well, of course, as join in our manifesto conference on 15th January.