County council awaits key government announcements as it works towards setting a 2026/27 budget
Oxfordshire County Council is waiting to hear how major changes in the national formula that governs how grant funding is distributed to individual councils will impact its finances as it gets ready to set a budget for 2026/27.
The most significant changes to local government funding in more than a decade were originally due to be confirmed by government in October but have now been delayed until late November. The council will then not hear specifically how much money it is to receive in grant funding until mid-December.
Oxfordshire County Council is currently expecting to lose around £35 million funding over a three-year period but until specific detail is made clear by the government, large uncertainties remain.
Councillor Dan Levy, Oxfordshire County Council’s Cabinet Member for Finance, said: “It is well known that the financial environment for local government has been very tough for some years now. We work hard to balance our budgets and continue to provide much valued, high quality services to Oxfordshire people. Overall, our finances are in a resilient and stable position compared to many other councils.
“Each year as autumn moves in to winter we have to wait to hear what funding central government will provide in grants, and there is always uncertainty until we see the detail in black and white. This year that uncertainty is greatly amplified because of the wide-ranging changes the government plans to the formula it uses to decide how much each individual council in England will receive.
“This creates real complications for our finance experts who have only been able to model the potential outcomes to a very limited extent due to the low amount of information available. We do expect to lose out over coming years but it’s hard to speak in anything other than the broadest terms.
“We do, of course, have all of the usual and continuing pressures on our budgets that have been experienced for a decade or more by us and fellow councils such as inflation and pressures on spend in social care. We also expect the government to increase the national living wage from April 2026.
“Our finances are managed well, and this gives us a strong base from which to seek protection for frontline services. However, there are so many unknown factors as we head into winter and the period when we set our budget for 2026/27.
“What we, and many people in local government, find disappointing is that the most significant change to the distribution of funding being announced for many years is being squeezed into the same timeframe as when councils are actually going through the process of setting a budget. It works against the ability to councils to conduct any meaningful consultation. It makes it very difficult to make the hard decisions that all councils go through when setting budgets and it limits our ability to serve our residents in an effective and cost-efficient way.
“We were promised by the incoming government that there would be improvements to the way that funds were allocated to support local services. We are still waiting for those improvements.”
When the council set its budget for 2025/26 it also set a medium-term plan for future years including 2026/27. This estimated a budget deficit of £2 million before the impact of funding reform.
New pressures and impacts from the new government funding formula would be added to this
In the same medium-term plan the council worked on the basis of a 3.99 per cent council tax rise in 2026/27. In the summer the government confirmed that the referendum limit above which a referendum would be required for a council tax rise will be 4.99 per cent.
Medium-term financial planning for the council will be set out to the early 2030s so that information is available to support local government reorganisation, currently timetabled to happen in April 2028. Oxfordshire’s district and city councils are doing the same and this is to provide a good basis from which new council structures can work.