SWINDON Council is likely to overspend this year's budget by more than £3 million, an emergency report to last night's cabinet meeting revealed.

The bleak forecast leaves the council's financial position so fragile that, unless drastic steps are taken to bring it under control, its reserves will end up in deficit by the end of the financial year.

The difficulties have been mostly caused by the spending of the housing and social services department spiralling out of control.

The department damned by Government inspectors in June as one of the worst in the country is heading into the red to the tune of £1.9 million.

To try to rescue the situation, the cabinet last night decided to restrict the department's spending on care across all its services to a 'one in, one out' policy and freeze all non-essential expenditure and recruitment to non-essential front-line posts.

Last night's report outlined how the housing and social services department is forecast to spend £35.4 million by the end of the financial year, when it was allocated only £33.5 million in the council's budget.

The biggest single overspend predicted is £700,000 for providing independent sector accommodation for children. The problems are being caused by a shortage of local placements, coupled with the increase in the number of children needing care.

Officers say they are working hard to curtail spending by using more stringent criteria for taking children into care and trying to recruit more foster carers.

The department is also overspending by £200,000 on homelessness, £260,000 on residential services for people with mental health needs, £300,000 on residential services for people with learning disabilities and £440,000 on additional work created by the inspection by the Audit Commission and Social Services Inspectorate.

To make matters worse, the director of the department, Marie Seaton, is understood to have gone on sick leave from this week and one of her deputies, Jerry Oliver, is standing in. With council chief executive Paul Doherty also resigning, the outlook is looking increasingly grim.

Forecasts in other council departments take the overall predicted overspend to £3.089 million.