OXFORD City Council looks unlikely to outsource its troubled council tax collection service just four months after agreeing to privatise it.

The U-turn will be made later this month after the authority paid consultants £12,000 to report on how its revenues and benefits department could improve its collection rate, which is still one of the worst in the country.

In February, when the budget was set, councillors agreed to privatise rate collection after its in-house service made little impact chasing debtors.

It was thought privatising the service would save about £100,000 a year.

Now auditor KPMG has said outsourcing would achieve no significant savings and has recommended the service is kept in-house.

The latest figures available show that in 2005/06 the city council collected 94 per cent of the £52m owed in council tax roughly £49m, leaving a shortfall of about £3m.

A report, which was due to be tabled before councillors sitting on the finance scrutiny committee yesterday says "urgent action is needed " to improve this figure.

City councillor Stephen Tall, executive member for better finances, said: "If £12,000 means the council collects more money then it would have been money well spent.

"We are going to make damn sure it happens.

"We are better versed now in what the problem areas are.

"A lot of council tax gets collected, but just slower than other councils."

The KPMG report said "of the potential service delivery options, only continued in-house delivery stands any realistic possibility of improving performance and/or reducing costs in the short term" and "the private sector's performance in council tax collection is not demonstrably better than in-house delivery".

There are only five companies with the technology to run the city council's tax collection service including Capita, one of the largest private handlers of outsourced public services in the UK.

The company already runs the Town Hall's out-of-hours council tax phone payment service.

But Unison, the trades union representing city council employees, said it was "outraged" when the proposal to privatise was made earlier this year.

City council Green group deputy leader Matt Sellwood said: "This report is a complete vindication of the Green group's stance. It is a pity other councillors did not listen to us they have spent £12,000 of public money to be given exactly the same argument we presented during the debate.

"It was clear this outsourcing was never going to work, and was a desperate throw of the dice by two political groups who have no idea of how to improve council services.

"While council tax collection rates do need to be improved, I do not regard privatisation as the answer.

"The £12,000 spent on this report could have hired another part-time council tax collection officer, instead of filling the pockets of a rich multinational consultancy firm."