MORE than £3 million of taxpayers' money has been lost by the council because of a blunder with its new education contract.

The gaffe, the details of which have been confirmed by two separate senior town hall sources, will blow a large hole in the council's budget for the coming year.

From April 1, responsibility for providing education services to the borough's schools will transfer to VT Education and Skills.

The multi-million pound contract, which would see more than 100 council staff (formerly of EduAction) transfer to VT, was due to be signed in early February.

But it was realised at the last moment that provision had not been included in the contract for about 21 senior staff members.

Frantic councillors and officers have now decided to plug the gap with £3.4 million worth of efficiency savings, which were supposed to balance the budget.

A formal investigation is expected to be launched to find the cause of the mistake.

However, Cllr Chris Robbins, education cabinet member, insists the council is not to blame.

He said: "The job numbers originally quoted by EduAction were incorrect.

"They are responsible for this error and the costs."

Conservative group leader Cllr Matt Davis said: "If this is true, it is the most appalling example of gross incompetency and those responsible must be held to account.

"There is also the serious matter of the administration presenting a budget which they already knew could not be funded because they lost £3.4 million of the efficiency savings that were supposed to pay for it."

Cllr Davis said he was considering reporting the matter to the Audit Commission, a watchdog which is responsible for ensuring that public money is spent economically.

The efficiency review involves £23.7 million of savings over three years, which will be re-invested.

This coming year's budget was based on there being £9.4 million of first year savings from the review.

Leading councillors have repeatedly said the savings, which involve 300 job losses, could be made without cuts to services.

A council spokesman refused to answer questions about exacty where the £3.4 million would come from, or what the consequences of the mistake would be for council spending or saving in the coming financial year.

The spokesman also declined to say whether the administration knew about the mistake before last month's budget-setting council meeting.

Deputy council leader Cllr Keith Rayner issued a statement about the cost of VT's original bid, but refused to talk about any extra expense incurred because of the error.

Cllr Keith Rayner said: "The cost of the bid is within the budget set aside for the contract over the four years and has the potential to generate some savings in the last two years."