Covid-19 pandemic leaves Highland Council with £11.25 million hole in its budget

The impact of the pandemic is set to leave Highland Council with a further £11.25 million hole in its finances, amid 'ever-increasing uncertainty' over revenues in the current climate.

Councillors are being asked today set aside £10.9 million of council reserves to help offset the budget gap, caused by lower than expected compensation from central government after council revenues plunged during lockdown.

Council officers believe it will receive £8 million less than hoped through the UK government’s income recompense scheme, while a further shortfall of £2.9 million is being predicted after the Scottish Government rebuffed requests for 'flexibility around the use of second homes council tax income'.

Today's special full meeting of the council will also hear that the recent introduction of fresh Covid-19 restrictions, coupled with further uncertainty over the autumn resurgence of the virus, are likely to pose fresh challenges.

In a report, Edward Foster, the head of corporate finance, has outlined four possible funding options which could be used in the future – each of which would result in more borrowing by the council.

But councillors will not be asked to make any decision on those options at this time, instead doing so 'later in the financial year when there will be a need to decide upon the balance between' using further reserves or increased borrowing.

He added that short-term circumstances remain 'very challenging' for the council, and that any future borrowing may bring 'significant long term ramifications'. But he stressed that 'the council has evidenced significant improvement in managing the fiscal challenges faced'.

The council is also expected to continue lobbying for more central funds.

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