Donegal County Council is set to build just 16 houses under the voluntary housing scheme in 2010, compared with 161 in 2009.

Grants towards improvements and extensions will also be reduced.

In 2010, it is proposed to spend €8 million on social housing and policy changes are on the way to try and house those with the greatest needs within the severely limited number of homes being constructed.

The Council is also set to slash expenditure on major road, water and sewage treatment programmes in the next few years.

And there could also be cut-backs on a range of community-based projects ranging from libraries to playgrounds and as a result, hundreds of millions worth of projects face being delayed or shelved.

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Although the Council has identified a list of projects – many of which are regarded as urgent – it now looks increasingly likely that it will not have enough money to start or complete many of them.

The collapse in the construction industry is one of the chief reasons for the financial headache as the bulk of its major projects are paid for through grants which it receives from the government.

However, in recent years it has also raised money through the Development Contribution Scheme (DCS). In effect, this was a levy on the construction section with the money being used to towards major projects.

But the DCS has now come up short. Indeed, the revenue from the DCS is already below estimates for projects that are already underway and could be €10.15 million less than expected, while these revenues for the next few years are not projected to exceed €1.2 million per annum.

The Council's priority projects for the period 2010-2012 include the Killybegs and Letterkenny waste water schemes, and the redevelopment of Greencastle harbour.

(BMcC/GK)