Medway Council bosses have ordered urgent cash-saving measures as the authority battles major financial problems.

The warning is revealed in a letter to all staff - leaked to KentOnline - that unless spending is curbed immediately, the authority could end up with a £7 million "overspend" by March.

And that, according to a joint email from chief executive Neil Davies and chief finance officer Phil Watts, could "undermine the council's ongoing sustainability".

They are demanding a ban on all spending which does not directly deliver a service to the public that is "required by law".

A similar warning and order to crackdown on spending was issued by Medway bosses in September, but it appears to have had no effect.

The email headed "urgent action by all staff" said: "The situation has significantly worsened with the overspend forecast now exceeding £7 million."

It also intimates the most vulnerable in the community could pay the heaviest price for the shortfall.

It states: "The Children and Adults Management Team will be applying much greater scrutiny over the placement of children and over the award of care packages.

"With very limited exceptions, measures will be put in place to ensure that authority to incur expenditure will be restricted to senior, substantive employees."

The financial plight could also impact on local businesses and service providers.

Mr Davies and Mr Watts are demanding any invoices not supported by purchase orders will be "returned in the first instance".

The problems come as councillors have awarded themselves a 14% pay rise in allowances.

The opposition Labour group said the "spending moratorium [is] so severe that even basic necessities such as printer ink cartridges are being refused to council staff".

Deputy leader Cllr Teresa Murray said: "Council staff will now find it even harder to deliver council services that council tax payers have paid for and have the right to expect."

Responding to questions about the financial difficulties, Medway Council chief executive Neil Davies said: “Like many local authorities across the country, we are continuing to feel the strain of reduced government funding combined with increased demand for our services, many of which are statutory.

“We want to continue to provide high-quality services, as well as ensuring that our most vulnerable residents receive the important support they need.

"In particular we are now having to invest more in our children’s and special educational needs services where increased funding is required.

"As a consequence of this, we are currently forecasting an overspend and have until the end of the financial year to correct this position.

"So, in line with any good business practice, we are taking immediate action to address the forecast overspend without impacting the services that matter most to our residents.

“We have communicated the position to all our staff so they can commence the process of reviewing and reducing spending where we are able.

"Events and activities already planned and booked will still be going ahead, but all staff have been advised to contain spending and be mindful of the forecasted overspend when planning future projects until the end of the financial year.

“To make up for the shortfall of reduced budgets the council faces each year, we have been working hard over recent years to successfully secure external funding and increase our own revenue streams to continue providing high quality essential services for Medway residents.

“We will provide a financial monitoring report on quarter two spending to Cabinet on November 19, which will give us a clearer picture of the council’s financial position and will allow us to carefully plan for the remainder of the year."

Addressing the awarding of care packages, council head of communication, Celia Glynn-Williams, said: "We are reviewing our care packages to see whether they are still appropriate and valid and also to ensure we get the right package for the right price."

The overspend is the latest in a series of problems faced by the unitary authority this year. Since February, we have been reporting on losses incurred by its trading arm, Medway Commercial Group (MCG).

A senior officer was sacked as an internal review highlighted a projected loss of £1 million.

At the time, bosses would not comment on how much, if any, of the sum was linked to a police investigation into MCG, which was found to have taken on a number of additional projects "outside its core business".

The future of the annual Castle Concerts has also raised concern after this summer's live music event in Rochester made a shortfall of £300,000 for the second year running.

The council also faces government scrutiny after a damning Ofsted report on its children's services, despite an overspend of nearly £1 million.

Read more: All the latest news from Medway