Plans have been drawn up by Leicester City Council to cut spending on bus services, libraries, festive decorations and homeless hostels – and more cuts will be announced by the council next week.

Mayor Sir Peter Soulsby has announced draft budget proposals for children's services, housing, transport and neighbourhood services which will save a total of £600,000.

Bus services and libraries face some of the heaviest cuts – though spending on road maintenance and children in care will increase.

Next week, a second announcement will reveal even greater cuts to other areas of council spending.

Sir Peter said: "We're being forced to cut £40 million over the next two years.

"We have to hope that the economy doesn't get even worse which would mean the Government forces us to cut even more from our budget."

The proposed budget was put before Labour councillors at their regular group meeting on Monday evening.

The second raft of proposals will cover issues such as care for the elderly.

Jane Dickson, 40, of Aylestone, said: "It's a shame that libraries are going to be cut back – it seems like one of the staple council services.

"But I suppose most people would prefer to see libraries lose funding than care for the elderly or the disabled."

Albert Massey, 69, from the city centre, said: "I'm very worried about what will happen to bus services in the city if subsidies are cut.

"The bus services aren't very good to begin with."

Tory opposition councillor Ross Grant said: "It's unfortunate that the country's finances are in such a bad state and, as a consequence, the city council has to take its fair share of cuts.

"These proposals are a start but, as ever, the devil is in the detail, which is why we need a detailed look at the budget.

"We need to see whether the council is being innovative enough to protect services, while really driving out efficiency savings.

"My concern is how these savings have been approached, because there's never much creativity or imagination shown on these issues by the council."

While many service reductions are in the pipeline, some areas of the council's work will get extra funding.

The £5 million road maintenance budget will be increased by more than a fifth to deal with a backlog of repairs and poor road surfaces.

The £8 million budget for children in care will increase by 10 per cent, due to the increasing number of young people looked after by the local authority.

The budget is in a draft format and final proposals will be signed off by Labour councillors next month.

It will then go before the full council in February, where it is certain to be passed due to Labour's dominance in the council chamber, with 52 of 54 seats.

Last year, the city council cut £30 million from its budget.

There are £20 million of cuts set for the coming financial year and the same again calculated for the year after that.

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Pluses and minuses: Breakdown of proposed cuts and extra spending in the budget for 2012-13

Proposed spending cuts and efficiency savings announced yesterday include:

Buses

Bus subsidies which keep less-popular routes operating would be cut by 40 per cent to £300,000.

About 40 routes are subsidised in the city. It is unclear how the cuts would affect each of the services.

About £400,000 would be saved by cutting free travel for special needs school pupils unless their written statements state they need it.

All free transport for voluntary-aided schools – such as faith schools – would be cut, saving up to £46,000.

Those who travel more than three miles for further education would lose their right to free transport unless they are from a low-income family.

Further education students with special needs would lose free travel unless they are from low-income homes.

These last two changes would save nearly £300,000.

Libraries

Cuts to library opening hours, reduced management costs, a reduction in the number of librarians by five and a trimmed book budget are all on the cards.

A minibus service which regularly takes more than 250 old people to their library would be scrapped.

Aylestone, St Matthew’s and Fosse libraries would be moved to buildings nearby and have a reduced book selection.

These moves would save about £250,000 next year and more in subsequent years.

Hostels

Upper Tichborne Street hostel for young homeless people would be closed, to save £103,000.

The council said the money could be better spent on help and advice to get young people off the streets long-term.

Hospitality

A hospitality service which provides food and drink for councillors and officers at meetings would be axed to save £77,000.

Park-and-ride

The council subsidises park-and-ride schemes around the city by £428,000.

It had planned to reduce subsidy over time but next year the subsidy would be cut by £90,000 instead of a planned £50,000.

Cleaning

The £271,000 budget for keeping St Margaret’s bus station clean would be cut by £70,000.

Deputy mayor Rory Palmer said efficiency savings would mean the public should not notice any difference.

Bus lane fines

The city council anticipates it will earn up to £250,000 a year from fines on motorists who drive in bus lanes.

Cameras would be mounted next to the lanes.

Festive decorations

Funding of lights for all celebrations – from Christmas to Diwali – would be cut by 15 per cent.

The current budget is £167,000 but this would be reduced by £25,000.

Traffic warden fines

Parking enforcement officers are expected to bring in about £50,000 a year, including through powers to issue fines for littering and dog fouling.

Noisy neighbourhoods

The noise investigation team currently operates Monday to Saturday.

The council is proposing to stop operating the service on a Monday. This would save £30,000.

Extra spending

Road maintenance: The current annual budget of £5 million would increase by £1.1 million.

A severe backlog of road repairs means that without significant investment the roads will rapidly deteriorate.

Children in care: The £8 million budget for looked-after children would increase by £800,000 due to an increase in the number of people in care.

The rise is partly due to more vigilance by members of the public and social workers following the Baby P scandal.

Missing cash

Parking income is usually about £5 million each year, but is likely to be down by close to £500,000 over the next few years.

This is partly due to the rise in the number of private car parks in the city.

The city council had planned to share its environmental health and building control teams with another council to cut costs, but a deal has not been struck, leaving a £630,000 overspend in the budget.