City council leaders in Oxford are warning they face making cuts to jobs and services due to the global financial downturn.

Officers are warning council leaders that the local authority is facing falling income and rocketing costs, with the likely overspend on services estimated at £1m.

Fewer people are using the city’s leisure centres and car parks, while tourism is also down because people are cutting back on their spending, a financial report warns.

The problem has been compounded by the escalating costs of the concessionary bus fare scheme for pensioners, which is now expected to cost £500,000 more than expected.

The council’s financial reserves are also said to be under real threat from “the potential write-off of all or part” of its £4.5m investment in Icelandic banks.

Officers are now undertaking “line by line budget reviews” of each department’s spending plans.

Measures are already in hand to axe the number of city council managers by a fifth.

But new cost-cutting plans are being drawn up with a belt-tightening draft budget to be submitted to the executive board on Wednesday, November 26.

The leisure department is facing a £300,000 reduction in the total amount of income it was expected to make.

The report said: “The economic downturn is having a material impact on the achievement of income targets.

“The combined impact of cost pressures, primarily due to the credit crunch and the rise in energy costs, has led to a forecasted overspend of £1m against service budgets.”

At the same time the council is being hit by a drop in returns from its investments.

Deputy leader Ed Turner said: “We are trying to manage the situation as best we can. We will be lobbying for extra support from Government to cover the impact of the concessionary bus fares and what has happened with Icelandic banks.

“The situation is now very difficult. The draft budget will be our best attempt to square the circle. But we are determined that the most vulnerable people should not lose out.”

Officers are now also reviewing council reserves to see if any money can be released to balances to offset any Icelandic bank losses.

The forecasted cost of the pensioner bus scheme has again had to be revised because of the number of pensioners enjoying free trips.

The city council originally set aside £2.6m, which included £800,000 from central government.

The cost is now expected to be £3.1m.