Highland Council poised for 35% tax raid on household budgets over 5 years despite a large increase in Scottish Government funding
Highland Council is poised for a massive council tax raid on north households totalling 35 per cent until the end of the decade despite finance secretary Shona Robison’s warning that huge hikes would not be needed.
The figures are contained in the Medium Term Financial Plan, which gives the best indication yet of what next year’s budget will look like - and how that will hit household budgets across the region.
A minimum increase of five per cent a year is projected up until 2030 plus two per cent on top of that so the local authority has enough cash to borrow to help fund the £2 billion two-decade Highland Investment Programme (HIP).
One reason for the hike is the Scottish Government has taken the handcuffs off councils so they can raise the tax after years when it was forbidden to do so while at the same time funding had been constrained.
In last week’s Scottish Government draft budget, Ms Robison announced £1 billion more in funding for councils with Highland Council recognising that there is “no council tax freeze or cap” but an “expectation that any proposed increases are minimised”.
But now the local authority is well into planning council tax hikes with projections ranging from six-to-eight per cent per annum for each of the five years.
The projected budget gap over the next three financial years is estimated at between £131 million in the worst case scenario without any mitigation (savings, cuts, revenue generation) to just £16 million over the same period with mitigation.
But that is if all the savings and cuts and revenue generation schemes work.
The council is already heavily in debt - with more than £1 billion in external borrowing - so it needs additional income to finance further loans to fund the HIP that aims to deliver new schools and housing alongside other much-needed infrastructure.
It cannot do that without additional taxation.
In a table marked “Projection of revenue value of two per cent earmarked to support HIP borrowing” it shows the increasing rises in council tax and the amount that could be borrowed up until 2030.
The council offers alternatives from a one per cent higher baseline increase - the baseline being a two per cent rise on top of a standard five per cent increase - to one per cent lower but taking the headline figure alone in 2025/26 that two per cent would generate £3.05 million.
Then in 2026/27 a further £3.289 million is generated; in 2027/28 it is £3.554 million, 2028/29 delivers £3.841 million and in 2029/30 a further £4.150 million that equates to £46.2 million worth in loans in year one and up to £341 million in the next five years.
In the background to that is a huge level of council tax debt in the Highlands - by some accounts the highest in Scotland - indicating many are already struggling to pay at existing prices.
No budget is insignificant but a lot will be riding on this one for several reasons – the main one being that it will be set in February, so it is the last one that will have time to take effect prior to the 2026 Scottish Parliament elections.
If the SNP enter that election cycle in the Highlands with an under-performing and under-delivering council that has an SNP-led administration, it could prove to be one more problem for the party after 19 years in government.
Then there are the major challenges the local authority is operationally obligated to deal with including how to bridge the growing gap between funding and service delivery.
But the leader of the opposition in council, Lib Dem Alasdair Christie has urged caution saying that for many the cost of living crisis remains a real present threat to people’s finances.
He said: “The SNP led Administration supported by independent councillors fail to understand that folk are still in a cost of living increase.
“We are still living with inflation and high energy costs and the significant council tax increases being trailed in this report will do little to help folk”
The chief officer for corporate finance Brian Porter explained that money from the two per cent increase will be earmarked for the investment programme - in other words it will not be used elsewhere.
He said: “A core council tax increase of five per cent per annum, with the HIP earmarking of two per cent being over and above this baseline.”
