Devon County Council is forecasting a budget overspend of £2.7m for the 2020/21 financial year.

But that figure still excludes the £47.7m 'black hole' relating to the funds put towards Special Educational Needs and Disabilities that the Government was going to put in place and plans to deal with.

The council's cabinet heard on Wednesday morning that the position for the end of September (month six) was a £2.7m overspend compared to the target budget, a £1.8m reduction on the month four position.

But the Dedicated Schools Grant funding shortfall, relating to Special Educational Needs and Disabilities, had risen to £27.8m as a forecast overspend, in addition to the £19.7m from 2019/20.

The cabinet heard that the budget deficit would be managed by not making the full 2020/21 planned contribution to reserves which would leave the Council in a break-even position, if the overspending materialises.

But once again, concerns were raised about the DSG now sits totally 45 per cent of the council's reserves, with no guidance yet as to how this 'real sum of money that has been paid out' will be dealt with from Central Government.

Mary Davis, the county treasurer, said the deficit was 'worrying' and that it was against her instincts to carry a negative reserve that is growing, but it was what Central Government continued to tell them to do.

She said: "The Government is likely to issue a statutory override notice that will take effect from the end of November. It will instruct councils to hold DSG deficits as an unusable reserve until April 2023 and this means that the deficit would no longer be taken into account when the Councils financial sustainability is assessed.

"But it won't go away as a problem but has been kicked down the road. We will have to deal with it eventually, but I am not sure if Government will deal with it to fund it or give us some funding towards it."

Cllr Alan Connett, leader of the Liberal Democrat group, said that the size of the figure was a real worry, adding: "This is real money that has been paid out. It is 45 per cent of the council's reserves so a huge sum of money we are carrying and eventually the money has to be paid back.

"The Government either needs to give us the money or we will have to make cuts to claw it back, so we need a solution, and we need an answer to this. At the end of next financial year, could be around £80m, which is a big cloud on the horizon."

Cllr Rob Hannaford, leader of the Labour group, added: "I am uncomfortable this. It is still real money that the council has saddled as financial pressure. It is a growing problem and becoming serious problem for us, ad we must have the funding to sort this out as we cannot keep going on like this."

The meeting from Mrs Davis that while the projected forecast of breakeven was welcome, there remained significant far reaching risks associated with the impact of the pandemic, which could be financially destabilising.

She said that confirmation of the fourth tranche of the Local Authority Support Grant, from which the County Council received just under £2.1m was extremely disappointing, with Cllr John Hart, leader of the council, adding it was the lowest figure any Shire county received.

He added that since the second lockdown was announced, a further £6.4m will be awarded to Devon County Council which will be taken into account in assessing the budget as the process moves forward.