Devon County Council (DCC) is facing an unprecedented £40million black hole in its finances caused by the cost of living crisis.
Spiralling demand for help for vulnerable children and adults has also been blamed as the authority is poised to overspend by more than the staggering sum in the current financial year.
Director of finance Angie Sinclair says urgent action must be taken by every department to rein in spending.
A panel of senior officers is already looking at options including cutbacks, remodelling services to save cash and cancelling or delaying building projects.
local councils are required by law to balance their books every year – unlike central government.
In a report to DCC’s cabinet, Ms Sinclair says: “The council has never before faced a combination of demand growth and price shock pressures of this scale.
“The pandemic and geopolitical situation has created huge financial pressures nationally and the county council is not immune from that.
“The current forecast is unprecedented and immediate action must be taken to safeguard the financial stability of the authority.”
Ms Sinclair says a financial stability programme has been created comprising senior officers from each service who are examining every option to save money.
She adds: “There is agreement for this work to be the top immediate priority for the council – to move at pace and scale for the authority to be able to take immediate action in response to the financial challenge.”
Cabinet members next meet on Wednesday, July 13.
The report details the financial pressures facing the council with children’s services forecasting an overspend of £17.9million with a big increase in demand and the rising cost of placing youngsters in care.
It includes a £7.7million overspend in education with the bulk of that taken up by transporting children to school because of soaring fuel costs.
Adult care services are forecasting an overspend of £6million.
“There is also a risk that inflationary pressures could result in costs, in addition to this overspend, of more than £10million this year,” says Ms Sinclair.
“National pay negotiations are at a very early stage but indications are that increases to the National Living Wage coupled with the cost of living crisis will result in a higher than expected pay claim this year. The estimated cost of this has been included within the forecast overspend.”
Her three-page report to councillors concludes: “It is very early in the financial year and much will, of course, change as the year progresses.
“However, immediate action must be taken to safeguard the financial stability of the authority.”
The Local Government Association says most councils are facing the same problems as in Devon.
DCC cabinet member for finance Councillor Phil Twiss said:”We’re in the same position as every household in this country.
“We’re not immune to the current cost of living crisis and the inflationary pressures stoked up by the pandemic and Putin’s war on Ukraine. So we’ve got to tighten our belts.
“We are well known as a quietly efficient, well-run council but even we are now struggling to make ends meet and are staring at a large black hole in our budget.
“And with few useable reserves left in the bank to soften the blow we must start to consider action now to avert an even bigger problem later.
“Support to the most vulnerable is more important than ever during these difficult times and our essential frontline services have to be prioritised.
“Equally we must try to continue to support the local economy and keep on investing in our roads, transport and other vital infrastructure to help Devon bounce back from the pandemic.
“But global price increases and spiralling inflation are having a major impact on our day-to-day services and infrastructure projects and we are facing extraordinary additional costs at a time when budgets are already under strain.
“We have a legal obligation to balance our budget and so we have very little scope for meeting these pressures without cutting services, cancelling or delaying major infrastructure projects or proposing even higher council tax rises next year. Something that many local people can ill afford.
“With inflation likely to rise even further and remain high for some time, we are likely to face a winter of difficult decisions and tough choices.”