Northamptonshire CC has issued a section 114 notice imposing immediate spending controls on the local authority.
The directions means no new expenditure is permitted, with the exception of statutory services for safeguarding vulnerable people.
The notice has been served in light of the severe financial challenge facing the authority and the significant risk that the Conservative-controlled authority will not be in a position to deliver a balanced budget by the end of the year.
Councillors have 21 days to discuss the implications of the section 114 notice and this is due to be addressed at a meeting of full council on 22 February.
Northamptonshire: All you need to know
Once a council issues a notice under section 114 of the 1988 Local Government Finance Act it is prohibited from entering into new agreements that incur expenditure and must strive to set a balanced budget.
The notice does not affect staff pay and the council will continue to meet its statutory functions.
Last month housing and communities secretary Sajid Javid used powers granted under the Local Government Act 1999 to commission an inspector to examine concerns regarding Northamptonshire CC’s financial management and governance.
Shadow communities secretary Andrew Gwynne said: “There have been deeply worrying reports for a number of months that this council was failing in its duty to the people of Northamptonshire – and now these people will pay the price for this negligence.
“Next week, the government must use the local government finance settlement to provide genuinely new money to fund our public services.”
A Ministry for Housing, Communities & Local Government spokesman said: “We recently appointed an independent inspector to look at Northamptonshire County Council’s finances.
“This is a decision for the authority, and it would not be appropriate for us to comment while the inspection is ongoing.”
@CIPFA has advised for some time that this position would ensue without stronger financial management. Nonetheless we are sorry to see the first use of s114 in twenty years, because the later it has been left unresolved the harder it is to now recover @mycountycouncil finances. https://t.co/ZJQWlgbEjV— Rob Whiteman (@RobWhiteman) February 2, 2018
Process for s114 uncertain. Designed for a time when it was possible to set a balanced budget. What if its no longer the case for some LAs?— Adrian Jenkins (@adrianpjenkins) February 2, 2018
Thoughts are with #localgov colleagues striving to stabilise Northants. But no one should be under any illusions: many councils are now only able to "balance" their budgets by doing the previously unthinkable.— Piali Das Gupta (@PialiDG) February 2, 2018