The Wigan council department responsible for children's care is projecting a potential deficit of almost £16m by the end of the financial year.
The children and families directorate already overspent by £6.7m between April and June of this year – and this figure is expected to continue to grow.
The service received a £4m boost to its budget this year, allowing for more staff to be recruited, and a further £6m came from the council's reserves.
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But due to an increase in the number of looked after children, the council has been placing more kids outside of the borough and using private providers.
There are currently 72 children placed in external residential placements commissioned by Wigan council, having increased from 45 last June and continued to rise until May of this year when the situation stabilised.
The cost of these placements - £4,854 a week on average - is projected to total £16.7m by the end of the year, up from £11.2m in the previous year.
It comes six months after council bosses promised 'significant changes' to the number of children who are put in care outside of the borough by the summer.
Labour councillor Nazia Rehman, who is the portfolio holder for finance, resources and transformation at Wigan council, told the cabinet at a meeting on Wednesday (August 5) that this increase in demand is a 'national issue'.
She said: "We're experiencing significant cost pressures in our children's directorate. This is largely due to the significant cost of external placements.
"There's currently no solution to this and if care needs continue to increase, the position will deteriorate even further."
Coun Rehman told the cabinet that government representatives who have met with the council were aware of the issues local authorities are facing.
She said the council would need to use more reserves to balance the budget.
Other council directorates are also experiencing an overspend, however, Coun Rehman said this is expected to 'come under control' later in the financial year.
Wigan council reported a small underspend of £153,000 in the last financial year after receiving Covid-related government grants to balance the budget.
This covered extra expenditure and loss of income relating to the pandemic.
The coronavirus crisis is expected to continue to have an impact on the council's finances this year with an estimated increase in expenditure of £31.8m and income losses of £12.9m, according to the latest figures.
A package of support for the 2021/22 financial year worth nearly £19m has been received from central government to offset the impact of Covid-19.
A further £15m has been allocated to support businesses in the borough.
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