OXFORD'S bid to become a unitary council was formally submitted to the Communities Secretary Ruth Kelly yesterday.

But both sides in the bitter battle over the future of local government in Oxfordshire know it will be the Treasury who will ultimately settle the issue.

For the decision on whether Oxfordshire County Council should be scrapped, with its powers and responsibilities shared by three new councils will come down to money.

Oxford City Council's bid claims that creating three unitary councils - one for the city, one for north Oxfordshire and one for south Oxfordshire - would produce annual savings of more than £7m.

At a stroke the waste and confusions created by a two-tier system would be ended, with on-going benefits for council tax payers.

A final decision is expected from the Government later this year, with successful new unitary councils up and running by 2009.

Now the city council is armed with a hefty report commissioned from the Institute of Public Finance. And it now knows it can count on the support of the Vale of White Horse, South Oxfordshire and Cherwell district councils.

Oxfordshire County Council, with its very existence at stake, believes the weakest performing local authority in the county is hell-bent on leading them all on a disastrous path, with the real set-up cost of reorganisation £53m - well in excess of the £27.1 in the city council report.

The cost in terms of the disruption to key services like schools and social services would hit even harder, says County Hall, with years of administrative chaos, redundancies, relocations, training and recruitment.

Establishing who is right is decidedly difficult. Oxfordshire County Council's chief executive, Joanna Simons, was bitterly complaining that the detailed figures had still not been made available.

But the leader of West Oxfordshire District Council, Barry Norton, reckoned he had already seen enough. "I would not put any faith in these figures. I believe they underestimate dramatically the true financial position.

"No one has bothered to even approach West Oxfordshire District Council about how the council is run and its costs. The figures in the bid seem be all modelled on national models."

The IPF report, however, confidently says that the cost of the reorganisation could be repaid "from savings arising from the change" in less than four years - a conclusion welcomed by city council leader John Goddard.

Substantial savings are promised from the abolition of overlapping services and simplifying management structures. But Sue Scane, the county council's finance chief, is already convinced that many of the proposed savings are being duplicated. She also warned it did not build in such crucial factors as the massive extra spending required to look after an ageing population, and extra savings demanded by Government, while the report appeared to assume savings could be made from day one.

Only £1.35m of the estimated £7.2m-a-year savings would come from Oxford. The bulk of the savings would come from the new south Oxfordshire council (£3.12m) and north Oxfordshire (£2.73m).

These figures may seem substantial, but they have to be set against the total of around £1bn that local councils in Oxfordshire spend on our behalf.

But the report to the Government will include remarkably detailed estimates of projected changes in council tax. In Oxford, for instance, council tax will go down by a princely 13p. Cherwell council taxpayers would see a decrease of £20 and South Oxfordshire £8.06. But this has to be balanced against increases of £27 in West Oxfordshire and £10.89 in the Vale of White Horse.

Confusingly, though, this seems initially to be more about levelling out bills in the newly-merged councils, with the authors of the report speaking of "the possibility" of further reductions in council tax in future years.

Oxford's bid has, nevertheless, been impressive enough to entice three of Oxfordshire's four other district councils, with the prospect of taking responsibility for schools, social services and highways.

At the Treasury, however, the number of Oxford City Council supporters will not be the figure that counts.