Middlesbrough Council is set to apply to the Government for emergency financial support to avoid effective bankruptcy.

Council leaders have been warned that if they do not approve requesting a bailout next week, a section 114 notice will have to be issued, which would mean becoming the latest council to declare itself effectively bankrupt.

The authority is legally required to set a balanced budget by March 11 but it faces a £6.3m gap in 2024/25, despite proposed savings and a council tax increase, rising to £8.2m in 2026/27, a financial report on the council’s website shows.

If any further cost-cutting measures and the Local Government Finance Settlement are insufficient to plug the deficit, council officials – if approved by the executive – will make an application to the Department for Levelling Up, Housing and Communities (DLUHC) for exceptional financial support by mid-January, the report states.

If the department refuses the request or offers too little cash, a section 114 notice will be issued.

Middlesbrough is the latest council facing a major funding shortfall.

Nottingham City Council declared itself effectively bankrupt in December while Birmingham City Council issued a section 114 notice in September.

Rishi Sunak in December accused Middlesbrough Council of “mismanaging” its finances as he faced questions about the pressures on cash-trapped local authorities.

The Prime Minister put the blame squarely on Labour councillors although they have pointed the finger at the Independent-Conservative administration that ran the authority until May 2023.

Conservative former Cabinet minister Sir Simon Clarke and Tees Valley’s Tory Mayor Lord Houchen last month called for the Government to send commissioners to take control of Middlesbrough Council.

The spate of crises facing local authorities has prompted concern about the provision of public services for local communities.

Metro mayors from West Yorkshire, Greater Manchester, Liverpool and elsewhere have urged Local Government Secretary Michael Gove to provide extra finance for struggling councils.

A DLUHC spokesperson said: “Councils are responsible for the management of their own finances, and it is right they take the necessary decisions to manage their position, but we remain ready to talk to any concerned about its financial position.

“We recognise councils are facing challenges and that is why we have announced a £64bn funding package to ensure they can continue making a difference, alongside our combined efforts to level up.”