Swindon Borough Council’s finances are “the worst they’ve ever been, and next year is even worse”, the authority’s finance chief has warned.

Councillor Keith Williams, Euclid Street’s cabinet member for finance and commercialisation, is set to give a very sobering brief on the state of the councils’ bank account to his cabinet colleagues next week, as the finance officers work to fill two yawning holes in the budget.

As it stands, the council is looking at an overspend on this year’s budget of £5m – which would be against the law.

But next year’s gap between projected spending and revenue is a shocking £38m, on a revenue budget of £156.7m.

Coun Williams said a combination of factors had lead to such a huge projected overspend: “Inflation is at around 11 per cent compared to around two, sometimes three per cent for many years until this one. It means everything is more expensive.

“The rate of inflation accounts for at least £25m of this projected deficit.”

Other cost increases include a nationally agreed salary increase for local government employees and an increase in the national minimum wage. That doesn’t affect many of the council’s direct employees, but Coun Williams said: “It puts up the costs for the care providers we work with to provide our statutory services in adult social care, and we are already speaking to those care companies.”

Nearly 80 per cent of the revenue budget is taken up by adult social care and children’s services, such as social workers. These must be provided by law and demand is increasing.

But Coun Williams said he hoped this year’s budget gap of £5m could be filled without significant cuts to services with restrictions on recruiting and a freeze on non-essential spending for the rest of the year.

He added: “We are looking at all areas, including in adults’ and children’s services. As they have the largest budgets, savings there will have the largest impact.”

Even putting up council tax next year by five per cent won’t go far to closing the funding hole. The government’s recent autumn financial statement relaxed caps on increase allowing a council like Swindon to increase its precept by 5 per cent - with three per cent for general spending and two per cent ringfenced for social care spending.

Coun Williams said: “That will bring us an extra £6m, and that will be year on year of course, but that doesn‘t cover nearly £40m.

“We have joined other councils in writing to the government telling it that we are looking at a financial crisis, and that this situation is not sustainable."