The authority's draft service plans for the next three years were published this week - and though they are still merely proposals, only two weeks remain before the area's 36 councillors must reach agreement on a budget for the new financial year.

Council leader Dick Walsh, chief executive Sally Loudon and head of strategic finance Bruce West held a second 'budget briefing' this week at which they warned that, though some tough times lie ahead, those challenges are expected to be even tougher in the two years after that.

"No decisions have been taken at this time although a fair amount of meeting has already taken place to discuss the options," Councillor Walsh said.

"In year one it is a damage limitation exercise we're looking at. In common with all other local authorities we are looking ahead at the impact of decisions we take this time and how those impacts may multiply in the coming years.

"The one issue facing elected members is that there is a legal obligation on them to set a balanced budget. There are serious implications if they don't."

The 2010-11 budget proposals contain a provision of £700,000 to deal with staff members' appeals under the 'single status' process, but the final package will depend on the outcome of national pay talks for local government workers, which are not expected to end until the spring.

The authority has also begun a programme of 'service reviews' in which each department is to be asked over a three year period to identify savings of 15 per cent - and though these savings are only hypothetical at present, they could result in alarming cuts if they do go ahead.

None of the three Bute members - who all occupy senior positions in the council - seem under any illusions that difficult times lie ahead.

Isobel Strong, depute provost and education spokesperson, admitted: "It's a really tough budget and there are going to be some very unpalatable choices to be made.

"People have to know there is no point in pretending everything in the garden is rosy when it isn't, and councillors will be faced with having to take decisions on things we've never thought of touching before.

"As far as education is concerned I don't think the impact will necessarily be on the number of teachers in front of classes but I'm worried we may not be able to maintain the quality of education we've had over the last few years."

Her colleague Len Scoullar, who is the council's spokesperson on island issues and European affairs, said: "I'm certainly hoping education and our most vulnerable residents will not be made to suffer and that we can look after these people in as best a way as can be afforded.

"The council is not going to be able to provide all the services that it does at present."

And Robert Macintyre, who holds the portfolio for economic development, the environment and rural affairs, added: "The next 12 months will be extremely challenging for all local authorities in Scotland but I'm confident the budget which will go before councillors on February 11 will be the fairest Argyll and Bute can present.

"The decisions we take will be very difficult but we had little option. The council is looking to itself to improve the way we provide services and, with our partners, get the best deal possible for those who live in Argyll and Bute."