Total responsibility for maintaining and repairing Oxfordshire's roads could be handed to the county council.

Under a Highways Agency agreement set up in 1974, the county council agreed to pay Oxford City Council for maintenance work on unclassified roads, painting yellow lines, and setting up waiting restrictions and cycle tracks in the city.

But the money the city council spends often exceeds the cash it gets from the county, and now city finance officers want to renegotiate the contract.

In one year, the deficit reached £500,000, and last year the figure was £359,000, despite attempts to reduce the bill.

The city council has made cuts of £3.7m because it has run out of savings, and is examining every area for more ways of cutting its costs.

Highways and traffic committee members will consider a range of options on the agency agreement when they meet on Thursday .

One option is to renegotiate the current agreement, while another is to hand over the responsibility to the county.

The second option would reduce costs but the city council would then have to consider possible job losses.

City Labour group leader Alex Hollingsworth said: "This is a very delicate balance between reducing the annual deficit and damaging the engineering arm of the City Works department, which is very profitable. I think the best way forward is to try to renegotiate the contract."

Eddie Luck, the county council's assistant director of transport development, said both authorities were hoping for "improvements in efficiency and less duplication".