Northamptonshire County Council 'warned it was unsustainable'
The leader of a council forced to ban almost all spending said she warned the government the authority was about to "fall over the edge of the cliff".
Northamptonshire County Council said on Friday it had brought in a "section 114" notice, banning new expenditure.
Heather Smith, Conservative council leader, said it was the "perfect storm" of increases in demand for services and reductions in government funding.
"We did warn that we would become unsustainable," she said.
She continued: "We have been warning government from about 2013/14 that, with our financial position, we couldn't cope with the levels of cuts we were facing.
"Before Christmas, I wrote to the secretary of state to say we were about to fall over the edge of the cliff because we can't just increase council tax.
"We've been in what you might call a perfect storm of huge increases in demand for our services at the same time as significant reductions in funding from central government."
A government spokesman said it had appointed an independent inspector to look at the council's finances, adding: "This is a decision for the authority, and it would not be appropriate for us to comment while the inspection is ongoing."
The council has insisted staff wages and spending on statutory services for protecting vulnerable people will be unaffected.
Philip Hollobone, Conservative MP for Kettering, said: "Just a few weeks ago the council was saying they could set a budget and it seems this announcement is more about the collapse of internal financial controls in the county council, which clearly are not adequate enough.
"The government may have to intervene rather more quickly than it perhaps intended to. It might have to send in commissioners to run the county council."
The council announced in December that it was looking to increase council tax by almost 5% as it sought to make savings of £34.3m.
It was then revealed in January it was considering selling its new £53m headquarters, which officially opened in October.
Last month, the government said an inspector would look into allegations of financial failings at the authority.
'Absolute bare minimum'
Speaking to Labour's local government conference in Nottingham, the party's leader Jeremy Corbyn said: "Austerity is unleashing chaos across our country, squeezing our local authorities and putting jobs, and the vital services they deliver, at risk."
Nick Golding, editor of the Local Government Chronicle, said as many as ten other councils could soon take measures similar to those implemented in Northamptonshire.
"Council spending power has fallen by almost half this decade; it's been a really, really difficult time for councils and there haven't been any sensible conversations about how you can provide the funding for social care and children's services, in particular, in the years to come," he said.
"No-one seems to be able to face up to the fact that the current local government finance system isn't working.
"The danger is that councils will only provide an absolute bare minimum in the years to come."
Analysis by Sam Read, BBC Radio Northampton's political reporter
Council staff are being paid which means libraries, schools and children's centres will stay open.
The council's leader has said she understands potholes will still be fixed as that is an existing contract that will be honoured.
But there will be no new deals, no new spending, on anything other than services legally required to keep vulnerable people safe.
While life continues for now, the seriousness of this move should not be underestimated - a warning like this has not been made at any authority for almost two decades.
It has serious long-term implications for the authority as councils have to balance the books by law.
In Northamptonshire there are two levels of council and so services like bin collections and car parks are the responsibility of separate borough and district councils that are not affected.
It is the first section 114 notice - a provision of the Local Government Finance Act - issued in about 20 years but Prof Tony Travers, from The London School of Economics, believes others could follow.
He said: "I think there are others that are quite close to Northamptonshire's position and, with so-called austerity continuing into the next decade, I would be amazed if Northamptonshire was the only council to get into these circumstances."
Bob Scott, leader of the Labour Group on Northamptonshire County Council, said: "My only surprise is that a section 114 order has been issued just after an inspector has been appointed and started his work."
The implications are due to be discussed at the full council meeting on 22 February.