A council finance chief is posting an early warning of cuts to services in eight months' time.

Vic Allison is telling West Oxfordshire district councillors that they need to start looking at ways of saving £600,000 in next year's 2005-6 budget.

The advance notice is going out in a report to the next round of committee meetings, beginning at the cabinet tomorrow (August 25) -- with no suggestions as to where the savings could be made.

But the advice is being given in plenty of time following the council's experience earlier this year when it was faced with a similar situation and wanted to increase council taxes by 33 per cent. Just weeks before the budget was to be set, Local Government Minister Nick Raynsford stepped in and threatened West Oxfordshire with capping.

Council tax was then fixed at an average £63, a five per cent rise.

The result for this year is a revenue deficit of £2.3m, which is having to be met by taking money from the council's reserve of savings.

"Clearly this is not a sustainable position for the council," said Mr Allison in a report. "A target for efficiency savings of £600,000 is considered reasonable on the basis that this is ambitious but potentially achievable.

"It represents roughly five per cent of the council's budget. Any consequence for services will be reported back when detailed estimates are considered later in the budget process."

The council's financial troubles follow years of setting one of the lowest council taxes in the country by depending on bank rate interest from its £70m of reserves. But as interest rates have fallen, it has had to eat into the capital. The alternative of big tax rises has been ruled out by Whitehall.