A troubled county council has issued a second order to confine spending to "only the most essential services" amid fears that its budget shortfall could reach £70 million this year.
Government-appointed commissioners were sent in to run Northamptonshire County Council earlier this year after it issued a "section 114" notice restricting its own spending in a bid to balance the books.
The decision to issue a second notice, taken in discussion with the commissioners, means further cuts to services at the Conservative-led authority as spending is focused on support for the most vulnerable residents.
Labour said the council was effectively being allowed to go bankrupt for the second time in six months, and predicted a "slash and burn" assault on services.
A Government report this year found serious failings at the council and said it should be scrapped.
An extraordinary council meeting will take place on August 1 to discuss the crisis.
Council leader Matthew Golby said: "The financial challenge facing Northamptonshire County Council remains critical and the spending controls we have in place are vital to ensure we are focusing our limited funding on only the most essential services.
"At the meeting next month, we as a council will discuss a set of priorities built around delivering statutory services and services for the most vulnerable in our communities, and this means there will be difficult decisions that have to be made.
"We remain committed to doing everything we can to identify the savings required to reach a more stable financial position whilst ensuring those in our communities at risk of harm are protected."
Shadow communities secretary Andrew Gwynne said: "This Government has allowed a Tory council to declare itself bankrupt twice in six months.
"Northamptonshire is a perfect storm of local mismanagement and the crushing pressures of austerity.
"Commissioners will have no option but to slash and burn local services but it's the people of Northamptonshire that will be forced to pay the price for this neglect.
"The Conservatives' extreme ideology is pushing local government to the brink.
"The next Labour Government will fund councils fairly and deal with the our country's chronic social care crisis."
The Chartered Institute of Public Finance and Accountancy (Cipfa) said the situation at Northamptonshire was "unprecedented", but warned that other authorities are facing similar pressures.
Cipfa chief executive Rob Whiteman said: "The National Audit Office's most recent financial sustainability report points out that 10% of upper-tier authorities are similarly vulnerable to financial failure.
"That could be more than 20 councils at risk along with the essential services for several million citizens.
"Understanding and acknowledging the scale of pressures, and responding early, to financial stress is essential to avoid seeing more councils fail.
"Cipfa is encouraging the Government to use the forthcoming spending review to find money for adult and children's social care pressures whilst using rate retention and fair funding to provide additional resources to the sector.
"We also believe there is a case to accelerate and broaden reorganisation to reduce overheads.
"However, given the deteriorating fiscal position and wafer-thin control of Parliament, our advice to councils is that medium term planning cannot be founded on any assumptions of material government support."
A spokesman for the Ministry of Housing, Communities and Local Government said: "It is essential residents are able to have faith in their council, particularly in the responsible use of taxpayers' money.
"The financial challenges facing the council are clearly serious and reinforce how important it was that we took swift action to appoint commissioners.
"These commissioners will continue to work closely with the council as it takes the necessary steps to re-balance its finances."
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