Oxford City Council is so poor at collecting millions of pounds in rates from taxpayers it has been told to "aspire to be average".

And if the situation does not improve dramatically in the next year, parts of the authority could be privatised.

The council has been given a reality check by an independent consultant who marked a low point in the Town Hall's consistently weak performance in collecting council tax.

It fails to bring in £3m a year in council tax and auditor Jez Leaper said its most realistic improvement could only to be rated as "average".

Mr Leaper even criticised the council for being as bad as it was a decade ago.

During a presentation Mr Leaper, of auditors KPMG which was paid £12,000 to compile a no-holds-barred report on the Town Hall's revenues and benefits department said he could not disguise the truth of how badly the city council was performing.

Figures show that in 2005/06 the council collected £49m of the £52m owed 94 per cent.

But the council was told last week the figure should be 96.9 per cent.

Mr Leaper said: "There are things you are doing better, but they have not fundamentally improved the services.

"It's high cost, low performing and frankly it was 10 years ago."

The council has resisted handing its collection department over to a private company for now, but has not dismissed outsourcing if the situation fails to improve.

Exploratory talks with neighbouring South Oxfordshire District Council and Vale of the White Horse District Council about joining their council tax collection partnership fell through.

The authorities were understood to be "lukewarm" about welcoming Oxford onboard.

City councillor Stephen Tall, executive member for better finances, said: "My first job is to make sure those parts of the council that are not currently performing well do so. The second is then to look at alternatives and in some cases that may mean direct outsourcing. If our performance doesn't improve in the next year, we will need to make sure that there are alternative options available to us.

"But you cannot automatically assume privatisation will result in better or cheaper services.

"The council should not aspire only to be average, average is not good enough, but by going from poor to average the council can at least demonstrate it can improve in this area."

Mr Leaper told councillors that privatising the authority's relatively-small council tax collection department alone would not achieve cost savings.

He added that keeping the service in-house, as is now the case, could result in a "significant risk of failure".

City council revenues and benefits manager Paul Warters said: "In the medium term if we can improve our performance to a level that is no longer cause for serious concern, that would be an excellent step in the right direction.

"This is the only part of the department that has not seen significant improvements, but I am confident there will be."