Council warns of major budget challenges following government funding cuts

One-off capital investments in major projects and the need to meet on-going budget pressures are all in the mix as Oxfordshire County Council proposes a budget for 2026/27 while warning of significant future challenges resulting from funding reform.

A major change to the way the government distributes grant money to councils means it and many other local authorities will face real challenges from 2026/27 with £1.5 million of new savings to services being discussed to help close a budget gap of £5.4m – and more significant reductions in the following two years.

The government only told councils how much money they would be receiving just before Christmas, leaving no time for officers to work up savings proposals for 2026/27.

The county council has options for delivering a balanced budget in 2026/27 but will be unable to expand services as it would have liked and will ask scrutiny councillors and cabinet for views on how a current funding gap of £5.4m can be dealt with by 10 February when a budget is set.

Measures will be proposed for debate including the use of reserves; setting less money aside in forecasting annual pay inflation and increasing the amount anticipated to be accrued in bank interest on money the council plans to spend in the normal process of delivering services  – each of which come with risk.

Another proposal for debate is increasing funding that will potentially be needed to fund the cumulative High Needs dedicated schools grant deficit but not by quite as much as originally planned.

A further option that would help the longer run budget is to seek additional savings of £1.5m from services in 2026/27.

The council now knows for certain that it will need to find further savings of at least £14m in 2027/28 (in addition to the £5.4m in 2026/27) because the government provided funding information for three years. As such there will need to be planning work throughout 2026 to meet this large challenge. Further savings will be needed in 2028/29, the first year of local government reform in Oxfordshire.

By 2028/29 there is a reduction of £24.1m in funding from central government. Within that there is an increase of £3.1m in funding for the Families First Partnership that the government will expect the council to use to fund new investment and activity in preventative services for children’s social care. Excluding that, the reduction in grant funding is £27.2m

Councillor Dan Levy, Oxfordshire County Council’s Cabinet Member for Property, Finance and Transformation, said: “While we always take a prudent approach to budget setting there are pressures relating to social care that need to be met. These services are demand-led and if that demand rises then we have to find the money to meet the costs. There are also inflationary costs to be met in 2026/27.

“As a cabinet we will listen to councillors in the scrutiny committee and debate ourselves how we balance the 2026/27 budget and we have options that do not impact on services. However, people need to be under absolutely no illusion that in future we and many partner councils in local government will not have that luxury. Having three years’ worth of funding information means we know that stark reality for certain.

“Money is being redistributed away from Oxfordshire and other areas on a large scale by the government. There will be very real impacts on our budgets and our services in future.

“While we respect the government’s desire to put extra money into areas of the country that have higher levels of deprivation, we do not think this should be at the expense of Oxfordshire and its residents.”

The proposed Council Tax rise for 2026/27 is 4.99 per cent. The government has assumed that the council will set Council Tax at this level for each of the next three years in calculating the amount of grant funding it awarded the council under its new formula for distributing funds to councils across England.

Cllr Levy added: “This year’s budget features a number of positive investments but we are going to start facing real challenges thereafter. We need people to hear that message loud and clear. The government has cut grant funding and assumed the council will make up the difference with maximum Council Tax rises.

“The effect of this is that we will have to put up Council Tax by 4.99% each year, but a lot of this money will immediately be subtracted by the government and sent elsewhere. This is both financially difficult and hard to square with local accountability and choice.”

Key investments

• The council will continue the annual highway gully cleaning that was reinstated in 2025/26 and a further £4m will be invested (£2m in 2026/27 and £2m in 2027/28) in improved drainage infrastructure to help protect communities from flooding. This will deliver new and replacement drainage systems and help roads be kept free from flooded areas as much as possible, strengthening local flood resilience.
• A total of £150,000 will be invested to progress design and construction for Phase 1 of the Wantage Market Place project, focusing on the West End. Building on previous design work and consultation, the scheme will replace the tarmac surface with paving in keeping with the historic town centre, creating a safe, traffic-free space with step-free access.
• Libraries will see capital programme investment to create flexible, accessible spaces that supports a wider range of activities and resources with £360,000 for Wantage Library and £250,000 (rising by a further £500,000 in 2027/28) for Goring Library and £550,000 for Didcot Library.
• A total of £14m is proposed to be allocated to adult social care to deal with financial pressures including projected population growth and accompanying increases in people in care and the financial effect of the increase in high-cost complex placements.
• A total of £19m is proposed to be allocated to Children’s Services to meet additional costs of children’s social care and education. In addition to this, new activity required by the government as part of the Families First Partnership will be funded from a £3.1m increase in grant funding in 2026/27.
• Demand for the park & ride joint ticketing deal (£4 for 16 hours of parking and return bus ticket for one person, £5 for two people, plus up to three children under 16 travel free) has exceeded expectations. The congestion charge is working to shift people away from cars and onto buses and active travel.  Extra funding of £400,000 is required for it to continue in 2026/27 with potentially more in future years. This will be funded from parking income.
• Maintaining real time passenger information digital display boards at bus stops across the county in 2026/27, installed due to sustained Bus Service Improvement Plan funding from the government, requires additional investment. A total of £320,000 is required to maintain the entire system. This funding helps to ensure the lifespan of all display assets is maximised. This will be funded from reserves.

Savings

Because adult and children’s social care are now a much larger proportion of the council’s budget, it is challenging to find significant service savings. 

The following savings have been identified for 2026/27 but work will need to continue throughout 2026 to identify options from 2027/28 onwards.  

• The county council purchases electricity based on a forward purchasing price. If the prices and market trends remain as projected, there is potentially a £250,000 saving that the council can realise in 2026/27. This would need to be monitored and is subject to price changes.
• Other savings relate to the use of funding held in reserves to fund pressures where that is possible and the addition of £5.4m funding from the national packaging Extended Producer Responsibility Scheme that needs to be used to meet the cost of disposal of packaging waste.

The budget will be set by county councillors on 10 February