"The department has been demoralised … we are now going to rebuild from scratch and we have to leave the old ideologies [of child protection] at the door," he said.

His was a startling admission of failure. In the three years since the biggest federal intervention in 50 years of government in the territory, agencies are struggling to come to terms with endemic mistreatment of children.

Widespread sexual and physical abuse of indigenous children was identified three years ago by the Howard government. This week, in the wake of another government report, it was labelled a typhoon of official neglect.

Vatskalis and the territory's Chief Minister, Paul Henderson, offer few excuses. They admit to being overwhelmed by the scale of abuse and neglect and shocked by the findings of bureaucratic bungling. They promise action.

Incidents revealed by prosecutors and coroners have included hideous accounts of rape, murder, stabbing and drowning. Many have occurred in remote places awash with alcohol, drugs and illicit gambling.

The Alice Springs prosecutor Dr Nanette Rogers has detailed horrific cases of child cruelty involving the rape, murder and bashing of children and babies, and exposed a brutal unreported culture created by petrol sniffing.

Figures published in this week's landmark inquiry into the territory's child protection system underscore systemic failure to protect children. At the end of June, 870 children were identified as being at risk but their cases had not been investigated. It is unclear how many remain in danger.

Despite an increase in the territory's protection budget and the hiring of record numbers of caseworkers - in 2001 the budget was $7 million, this year over $130 million - the crisis is deepening.

In the three years since the intervention, notifications of child abuse - physical, emotional and sexual - have doubled to more than 6000 cases a year. The number of investigations has increased from 2000 to 4000. Yet successful prosecutions have been few.

The number of children removed from families has increased from 400 to almost 600, stretching the foster care system.

The inquiry found the government had failed to monitor children in care or provide foster parents with appropriate support.

Despite the bland title, the Growing Them Strong, Together report documents astonishing failures in the child protection system. The board of inquiry - made up of Professor Muriel Bamblett, the territory's children's commissioner, Dr Howard Bath and the paediatrician Dr Rob Roseby - condemns the system as overwhelmed and understaffed. Failures were compounded by high staff turnover and poor morale. Staff quit because the system could not meet its statutory obligations. There was also a culture of bullying and secrecy.

The inquiry sums up the situation this way: "The public would naturally expect that when they believe a child is being harmed … the matter will be investigated speedily and effectively. This has not been the case for some time in many service delivery areas. At the end of June there were 870 children who had been reported to be at risk who were awaiting formal investigation."

Three ministers in as many years had clearly not helped.

The response of the Henderson government to the findings has been immediate and unqualified. Vatskalis and Henderson announced sweeping reforms including the creation of a dedicated department and the hiring this financial year of more than 100 new caseworkers. They have approved 145 of the inquiry's recommended reforms.

But that is not likely to improve the situation any time soon. Vatskalis said the situation for children in the territory might become worse before the reforms take hold.

"We will have more people on the ground and there will be more notifications as a result. Rates of notifications will plateau before they start coming down. The problem had been neglected for years and as soon as we started injecting money with more workers, rates went through the roof."