Care England chief executive Professor Martin Green has warned local care providers and service users are at risk after Birmingham City Council declared effective bankruptcy by issuing a Section 114 notice.

The notice yesterday, which means all new spending, with the exception of protecting vulnerable people and statutory services, must stop immediately, was issued as the council said it was no longer able to meet its financial liabilities relating to equal pay claims and a budget of shortfall of around £87 million.

Green said: “The announcement made today by Birmingham City Council is a dire wake-up call that the current structures in place to support local authorities by the government are not fit for purpose.

“This event is the latest, in a long list of examples, highlighting how the government has failed to meet the needs of local communities and provide them with the necessary funding to support a strong social care system. Without government intervention, all authorities in England are at significant risk.”

Green cited the examples of Woking, Thurrock, Slough, Croydon and Northamptonshire who have  issued Section 114 notices in recent years and warned that further notices could follow from Kent, Guildford, Hastings, Southampton and Bradford.

The Care England leader said as many as one in ten local authorities had already served, or were looking to serve, or have taken urgent action to mitigate serving Section 114 notices after significant concerns have been raised about their statutory obligation to balance their books.

Green added: “Time has run out for Birmingham, and the government must immediately unlock essential funds for all local authorities to ensure adult social care and our public services are uninterrupted.”

Cllr Shaun Davies, chair of the Local Government Association, said:  “Councils in England face a funding gap of almost £3 billion over the next two years just to keep services standing still. 

“Councils’ ability to mitigate these stark pressures are being continuously hampered by one-year funding settlements, one-off funding pots and uncertainty due to repeated delays to funding reforms.

“The government needs to come up with a long-term plan to sufficiently fund local services. This must include greater funding certainty for councils through multi-year settlements and more clarity on financial reform so they can plan effectively.”

Cathie Williams, joint chief executive of the Association of Directors of Adult Social Services, said: “Across the country adult social care, and councils more broadly, are sliding into an increasingly unsustainable financial situation, with our research showing around two-thirds (63%) of councils in England overspent on their adult social care budgets last year.

“Despite the best efforts of staff in local authorities, overstretched budgets are not keeping pace with our increasing social care needs. This is demonstrated by the fact that around 430,000 people are currently waiting for some type of care, assessment or payment to keep them well at home.

“The chronic underfunding of social care is creating a vicious cycle, where the lack of care and support means that too many people reach crisis point and end up in hospital unnecessarily. This is bad for everyone and costly for the public purse. And in a time when many businesses are desperate for staff, people are having to give up work to care for family members.

“This situation can’t continue. Ahead of the next election we are calling on political parties of all colours to set out a long-term plan for investment in adult social care, so everyone can get the care they need, when they need it in the future.”

A DLUHC spokesperson said: “We have been engaging regularly with Birmingham City Council in recent months over the pressures it faces, including around its equal pay liability, and have expressed serious concern over its governance arrangements.

“We have requested written assurances from the leader of the council that any decision regarding the council’s issues over equal pay represents the best value for taxpayers’ money.”