The city of Newcastle is already seeing the first signs of social unrest because of funding cuts that threaten to make provision of many public services “completely untenable” by 2017, the council’s Labour leader has warned.

Nick Forbes, who has run Newcastle city council since 2011, said his local authority is already heading towards the realm of “impossible cuts” to social care, including transport for disabled children, but he is determined not to be in the first or second wave of councils that “goes down”.

Speaking to the Guardian, he said: “You can see the embers of unrest starting to smoulder. Nationally, you see it in that drift to parties outside the mainstream. Locally, we see it in a far greater profile of far right marches through the city, far left marches through the city … we see people in abject poverty, coming through our service centres daily.”

One major worry is future cuts to social care for children at a time of ongoing sexual exploitation cases, since Whitehall cash for this area has already been cut by 32%, while need is up by 40%.

“My very real concern is that … well, if this level of cuts continue, even our statutory responsibilities, like children’s social care, will be affected. What frustrates me like nothing else is how deaf government is to this argument,” he added.

His comments reinforce the findings of the National Audit Office, which last week published a report highlighting the fact that more than half of councils in England are at of risk financial failure within the next five years.

Forbes also suggested he would be grateful for more “solidarity” from some in the national Labour party. He said he had spoken to Ed Miliband “in passing” and the only conversation he has had with Ed Balls, the shadow chancellor “ended in an argument – about whether [regional] devolution is the right approach”.

“I think it is, but his view was: ‘We can’t all move at the same speed, and therefore we’ve got to move at the speed of the slowest’ – to paraphrase,” he said.

“I was irritated, because it reinforced the Westminster-centric mentality: the idea that you get into power, to pull levers to make lives better for people. But I think that experience has shown that they’re rubber levers. People pull them but nothing happens. It makes our politics look even more hollow.”

Forbes said his strong message to the Labour frontbench was that “unless there is urgent and fundamental reform of local government finance within the first year of a Labour government, we will have Labour councils falling over, financially”.

“The seeds have been sown over the last five years for that to happen, and the crisis is likely to hit in the next couple of years,” he said.

Asked about how a Labour government would help cities like Newcastle if in power, Hilary Benn, the shadow local government secretary, said the party was “committed to a fairer funding formula and longer term budgets to help councils plan ahead in the very difficult circumstances they face”.

“As everyone knows, David Cameron has hit certain communities really hard by unfairly taking most money away from the most deprived areas,” he said. “And Ed Miliband has responded to local government’s call for more devolution by setting out our ambitious plans to pass powers and finance back to city and county regions.”

Chi Onwurah, a Labour shadow minister and MP for Newcastle upon Tyne Central, echoed the concerns of Forbes, saying she was also very worried about the city’s financial position in the future but stressed it was currently putting forward a balanced budget.

She also said she had seen signs of local unrest over issues like bin collection, which has moved to once every fortnight.

“It’s certainly the case there are groups seeking to exploit divisions, that are consequences of these cuts,” she said.

“There are groups blaming litter on certain ethnic groups. Of course, that’s going to cause divisions and lay the foundations for unrest. That is a very clear example of where funding cuts have caused increased divisions in communities you would hope to be cohesive.”

Nick Brown, the Labour former chief whip and MP for Newcastle upon Tyne East, said the Labour party’s plans to create a fairer council funding formula would help Newcastle substantially but another significant factor in improving the city’s fortunes would be boosting private sector investment.

“Newcastle is a great place to work and live. We need to strengthen and broaden the private sector employment base to end once and for all the scourge of long term unemployment,” he said.

Figures produced by Newcastle have shown that many northern communities have been hit particularly badly by government spending cuts compared with the south, because of the way funding is calculated.

But ahead of the election, the coalition parties have both joined Labour in trying to woo northern cities with new transport and infrastructure initiatives, as well as promises of regional devolution.

George Osborne, the chancellor, unveiled his plans to create a “northern powerhouse” earlier this year, and may offer more cash for infrastructure at the autumn statement. Miliband has said he would create “regional economic powerhouses” and the Lib Dem leader, Nick Clegg, launched a new project called Northern Futures.

Responding to Forbes’s claims, Kris Hopkins, a Conservative local government minister, said: “Every bit of the public sector needs to do their bit to tackle the deficit left by the Labour government, including local government, which accounts for a quarter of all public spending.

“This government continues to deliver a fair settlement to every part of the country – north and south, rural and urban, metropolitan and shire. The reality is since 2010 budgets have been balanced, council tax has fallen by 11% in real terms and public satisfaction with local government has been maintained.”