Financial chiefs at County Hall say the Government's annual financial settlement "is not the best of news" and could lead to service cuts.

Whitehall has given Oxfordshire County Council £102.9m to fund services in 2008/09, a two per cent year-on-year increase.

The money pays for about two-thirds of the authority's budget.

The county council provides services such as highway maintenance, social services, education, fire and rescue services and libraries and museums.

But County Hall criticised the settlement as a real terms cut, as the increase was below the rate of inflation, currently running at 4.2 per cent according to the Retail Price Index.

A spokesman hinted the settlement could lead to cuts because it left the council "stretched in terms of providing services to current levels".

County councillor Charles Shouler, cabinet member for finance, said: "We knew this was going to be a tough settlement and we have tried to plan for that. We remain totally determined the council tax rise will be no more than four per cent.

"We now have the task of analysing the maths.

"There are still some other grants to come in so we don't yet have the full picture.

"We won't be in a position to make definitive decisions on budgets for some weeks. As things stand it is not the best of news."