Controversial plans to set up a city academy in Newcastle would mean the closure of another school in the West End of the city, education bosses say.
The academy would have 90% of pupils from the local area
Education officials have met Lord Irvine Laidlaw to discuss whether he would fund such a project.
Liberal Democrat leaders of Newcastle City Council say they are being forced to consider an academy if they are to secure state investment for education.
But union Unison has expressed its concerns about the plans.
Council executive member for education Nick Cott said if they went down the city academy route, it would mean another school would be closed on 31 August 2008, with the academy opening the next day.
He said 90% of the academy's pupils would come from the local area.
"The situation is, from an education perspective, we feel there are enough schools in the West End as it is," he said.
"What we feel is the best option would be for one of those schools, Westgate College, to close when the academy opens, and the children from that school would transfer to the new academy, which would have massive investment and we see this as quite a positive move."
He said the council had been told unless it could show it was keen to improve education standards through having an academy, investment in schools could be at risk.
But Kenny Bell, from Unison, raised concerns about the situation, including the influence a private investor might have on children's education.
He said: "I think this is incredible. First of all the Liberal Democrats were elected only in June. In their manifesto they said they were absolutely opposed to a city academy.
"Here we have them rolling over. Apparently they have been told by a Labour government, which I agree is unacceptable that if they don't accept an academy they won't got £130m to invest in refurbishing and rebuilding secondary schools.
"We need some political leadership here, not them rolling over."
He called on Mr Cott to take a deputation to Education Secretary Charles Clarke to call for the investment in schools without the "strings of the academy".