Mr Tulley, speaking last week at a special meeting to sanction the cuts package, said the authority had to rebuild its reserves after the three emergencies this year dented its coffers. Cash had to be clawed back from education but the pound;3.9 million overspend had already gone into front-line services.

Mr Tulley is chairing an internal working group investigating the overspend and insisted the council could not write off the deficit. But it would take several years to retrieve the debt without damaging services. No teachers will lose their jobs and no schools will close in the package.

He said: “Over the last two financial years, schools have had the benefit of almost pound;4 million extra spending. This cannot continue because this is money the council does not have. The position in this council is no different to many others. Most budgets in most authorities are under serious pressure.”

John Campbell, acting chief executive, emphasised that staff in schools and the education department had been unable to keep spending within budget for both of the past two years. The accumulated deficit was therefore pound;2.8 million. Schools had also run up delegated budget overspending of pound;1.1 million.

Alastair Hewat, civic head, said: “This is a serious situation but it should not be taken out of context. It represents 2 per cent of the education budget.”

Mr Hewat promised an open approach to the investigation, adding: “There will be no cover up.”

Audit Scotland, the spending watchdog, has invited KPMG, the council’s external auditor, to conduct further inquiries into the spending hole after receiving an initial report. Ronnie Hinds, controller of audit, will submit his report by October.

It is believed the extent of the deficit only became apparent in March once final figures came in. John Taylor, assistant director of education who was in charge of education finance, was subsequently sacked for falsifying his qualifications.