Southampton City Council could go bankrupt by next year and must take “all possible action” to avoid this, a report has warned.

The council's chief financial officer said it must pay out on “essential spend only” as it could be left with no reserves.

It comes as the council approved money-saving plans to switch off streetlights for three hours every night and a 4.99 per cent rise in council tax.

The Itchen Bridge toll is also increasing for non-residents.

However more savings will be needed, according to the authority’s chief financial officer.

READ MORE: Council tax goes up as street lights are set to be shut off for 3 hours

In the report, the officer said a budget shortfall of £20m had been balanced by drawing from reserves.

This would lead to a forecast of £10.3m in “unallocated balance” in the reserve.

In the senior officer's view the budget proposals are "inadequate" due to a risk of increased demand and cost of living pressures, plus the risk of savings not being made.

READ MORE: Residents could face council tax hike to plug £20m budget gap

The officer went on to say that financial resilience is “much weakened” by using up the reserves which would lead to a section 114 notice - meaning no new spending is allowed beyond statutory services.

If the notice is issued, the council would not be able to make any more spending commitments and must meet within 21 days to discuss what action to take next.

The officer also highlighted that given final risks, "there is every chance" reserves would be needed to balance the books by 2024/2025.

At this point the reserves would "expire completely".

The officer “stressed the need” for the authority to take “all possible action to reduce the financial risks it faces” by sticking to the essential spending, avoiding new commitments and continuing to make savings plans.