Crisis-hit Croydon LBC has issued a Section 114 notice after extra spending controls proved not to be enough.
The order bans all new expenditure, with the exception of safeguarding vulnerable people and statutory services.
Croydon had been expected to apply later this month to the Ministry of Housing, Communities and Local Government (MHCLG) for a capitalisation direction, enabling it to borrow money to cover a revenue shortfall of £22m, but the council still faced a structural deficit, a potential budget shortfall in the current financial year of around £66m and £47m of cuts next year.
In the wake of a public interest report from auditors, the serious financial position facing the council meant it could no longer avoid a s114.
Croydon’s new leader, Cllr Hamida Ali, said: 'The COVID-19 crisis and a decade of austerity have had a major impact on our finances but it’s clear the council has also made mistakes and I am committed to fixing that.
'We're not going to fix these problems overnight and there will be difficult decisions ahead.'
The last s114 notice was issued by Northamptonshire CC more than two years ago.
