Britain is confronting a mental health crisis because resources for children are so stretched that some only receive help if they seriously self-harm or attempt suicide, Barnardo’s has warned.

Javed Khan, chief executive of Britain’s largest children’s charity, said that young people’s mental health had never been worse in the organisation’s 152-year history. Radical action was needed, he said, because funding cuts had forced charities to abandon vital services.

“It’s never been as bad, and in another five years’ time it’s going to be even more complex,” Khan told the Observer. “This mental health crisis is getting more severe and more difficult by the day. The numbers keep going up. Educational psychologists are pulling their hair out – they haven’t got the resources. They can’t respond as fast as they need to.

“We are going to regret this period if this goes on for too long. We are going to rue the day when we took our eye off the ball.”

Neera Sharma, assistant director of policy at Barnardo’s, said that in some parts of the country the pressure on resources was so severe that only the most extreme cases received help. “The threshold is suicidal in some cases; the child would have had to have attempted suicide or committed serious self-harm to get a response,” Sharma said.

Speaking before Barnardo’s annual lecture this Wednesday, where representatives of Jeremy Hunt, the health secretary, will be among the audience, Khan urged the government to adopt a dramatic new approach.

The lack of resources has forced the charity to walk away from a number of contracts during the past year because the money available to local authorities meant it could not offer a sufficient service, Khan said. “They are tightening their belt to a point they cannot tighten it any more. They are asking for more to be delivered for far less resources than ever before, and there is a tipping point where you just can’t deliver a safe, high-quality service,” said Khan, who is also a member of the advisory board for the children’s commissioner for England.

One way the government could save money would be to scrap the traditional tendering process in favour of a more collaborative approach between the state and charities: “I don’t think the tendering model is sustainable – there aren’t enough resources in the system,” said Khan.

The latest on the UK’s mental health problem emerged on Thursday when statistics showed that almost one in five children could be at risk of having mental health issues later in life, according to the study of more than 850,000 seven-to-14-year-olds.

Figures from NHS trusts in England in November revealed that 60% of children and young people referred for specialist care by their GP were not receiving treatment. In December the government published a green paper on mental health problems but Khan said that the plans lacked ambition, falling significantly short of what he felt was required.

“If you analyse it, then three-quarters of children are going to get no support,” he said. “The response is insufficient, it’s not broad enough, there is limited financial detail. It talks about rolling out a number of initiatives in a number of areas but funding is only secured to these areas until 2023. The prime minister has talked about this issue as a burning injustice but we don’t think the action is matching the rhetoric.”

Last month Hunt intervened in the debate to condemn social media companies for “turning a blind eye” to mental health damage suffered by children who have uncontrolled access to their online platform.

Khan said social media was an issue – comparing new technology to “allowing a film crew into the bedroom” – and that they were also liaising directly with companies such as Google and Facebook to limit potential harm to young people.

• In the UK, Samaritans can be contacted on 116 123. In the US, the National Suicide Prevention Lifeline is 1-800-273-8255. In Australia, the crisis support service Lifeline is 13 11 14. Other international suicide helplines can be found at befrienders.org