John McDonnell has accused the government of using cash-strapped local councils as “human shields” to absorb deep spending cuts by the Treasury.

The shadow chancellor seized on reports that Surrey – where the Runnymede and Weybridge constituency of the chancellor, Philip Hammond, is located – was facing a £100m cash crisis.

Analysis by the Bureau of Investigative Journalism identified Surrey as the council facing the largest gap between expected revenues and expenditures in the coming financial year. The average deficit at the 150 councils the bureau examined was £14.7m.

Meanwhile, a survey of senior council officials by the Local Government Information Unit (LGIU) thinktank found that almost 80% had no confidence in the future sustainability of council finances.

McDonnell said: “If you ever wanted to see the utter failure of this government, look no further than your local council. Many are struggling to maintain many basic services because they are being forced to pass on Tory cuts.

“There needs to be an urgent change of direction in local government funding in this country. We need to see an end to a situation whereby Tory governments are using local councils like human shields as they continue to drive ahead with their failed austerity agenda.”

McDonnell appeared at a conference in Preston alongside the shadow communities secretary, Andrew Gwynne.

Many of the councils under greatest financial pressure are in Tory-held areas, and Conservative MPs have put pressure on the government to relieve the squeeze in particular areas.

Sajid Javid, the communities secretary, announced an extra £150m this week specifically to be spent on social care in areas of greatest need, amid a growing backlash from backbenchers.

But council leaders said it would not be enough to meet rapidly increasing needs.

The LGIU’s survey of councils’ finances suggested that 94% are planning to raise council tax in the coming year to make ends meet, and 65% will be dipping into their financial reserves.

In his speech, McDonnell highlighted alternative approaches to delivering local services.

Labour believes the threat to council services, such as social care and support for children, is the latest stark illustration of the ongoing impact of austerity.

The government has promised to put social care funding on a sustainable footing, but a green paper on the issue is not due to be published until next summer.