Cherwell District and South Northamptonshire Councils are to conduct a two-year review into extending joint working into all service areas.
The agreement, which has already generated annual savings of £3.3m since 2011 for the two councils, is expected to pave the way for a confederation model in the future.
Cllr Mary Clarke, leader of South Northamptonshire Council, said: ‘If all goes to plan, we expect that over a ten year period, joint working could generate additional savings of £4m for South Northamptonshire and a further £8m for Cherwell. This helps to protect the front line services which matter most to our residents.’
The agreement originally included a three-way option with Stratford-on-Avon District Council, who later decided to postpone its decision until after May’s elections.
Cllr Barry Wood, leader of Cherwell District Council, said: ‘As Cherwell and South Northamptonshire already share some management and services an obvious option was to extend this approach across all areas and to open it up to Stratford as a neighbouring authority.’