Torbay Council has been forced to announce an ‘immediate moratorium' on all non-urgent expenditure.
The council's first quarter budget monitoring report forecast an in-year overspend of more than £2.8m due to a ‘substantial increase' in the number of looked-after children, which has increased by 20% t0 357 since November.
Other budget pressures include larger than expected numbers of agency staff in key services such as planning.
Chief executive Steve Parrock said: ‘In order to protect our reserves we have put in place the moratorium.
‘This means that even if an activity or contract is budgeted for it may be postponed or cancelled if it isn't urgent or required to meet our statutory duties.
‘Every effort continues to be made to bring forward further efficiency savings and deliver our current transformation projects at pace.'
Mr Parrock stressed that Torbay had not run out of money or been forced to use reserves.
He continued: ‘We have delivered the planned year on year savings and made the necessary cuts as agreed in previous budgets.
‘More difficult decisions will need to be made and we will continue to identify options, priorities and solutions to try to meet the expected future financial challenges.'
