Highland Council is preparing for a substantial increase in council tax that could reach 35% by the end of the decade. This move comes despite Finance Secretary Shona Robison’s assurance that such steep hikes would not be necessary.
Clear Projections in the Medium Term Financial Plan
The projections are outlined in the Medium Term Financial Plan, which offers a clear picture of next year’s budget and its potential impact on households across the region.
Meanwhile, the council anticipates a minimum annual increase of 5% until 2030, with an additional 2% earmarked to ensure sufficient funding for the ambitious £20 billion Highland Investment Programme (HIP) over the next two decades.
Annual Council Tax Increases:
- 2025/26: 5% + 2% (total 7%)
- 2026/27: 5% + 2% (total 7%)
- 2027/28: 5% + 2% (total 7%)
- 2028/29: 5% + 2% (total 7%)
- 2029/30: 5% + 2% (total 7%)
One contributing factor to this increase is the recent lifting of restrictions by the Scottish Government, which had previously limited councils’ ability to raise taxes while simultaneously constraining their funding. In last week’s draft budget, Ms. Robison announced an additional £1 billion in funding for local authorities.
However, Highland Council acknowledged the lack of a council tax freeze or cap and emphasized the expectation for any proposed increases to be minimized.
Planning for Tax Hikes: Financial Challenges Ahead
Currently, the council is in the process of planning tax hikes, with estimates ranging from 6% to 8% annually over the next five years. The projected budget gap for the coming three financial years is estimated between £131 million—without any mitigation measures—and a more manageable £16 million, assuming successful implementation of savings and revenue generation strategies.
Given that the council is already deeply in debt, with over £1 billion in external borrowing, it requires additional income to support further loans for the HIP, which aims to deliver essential infrastructure projects such as new schools and housing. Additional taxation appears to be the only viable solution to achieve this.
Revenue Generation from Tax Increases
Projected Revenue from 2% Increases:
- 2025/26: £3.05 million
- 2026/27: £3.289 million
- 2027/28: £3.554 million
- 2028/29: £3.841 million
- 2029/30: £4.150 million
Amid these financial challenges, the Highlands reportedly has one of the highest levels of council tax debt in Scotland, suggesting that many residents are already struggling with their current tax burdens.
Significance of the Upcoming Budget in Light of Elections
The forthcoming budget, to be set in February, is particularly significant as it will be the last one implemented before the 2026 Scottish Parliament elections. An underperforming council led by the SNP could pose additional challenges for the party, which has been in power for 19 years.
Opposition leader Alasdair Christie of the Liberal Democrats has expressed concern over the potential impact of these tax increases on residents already grappling with a cost-of-living crisis. He stated,
“The SNP-led administration, supported by independent councillors, fails to grasp that many are still facing financial hardships due to inflation and high energy costs. The significant council tax increases outlined in this report will do little to alleviate the burden on families.”
Financial Clarifications from the Chief Officer
Brian Porter, Chief Officer for Corporate Finance, clarified that revenue from the proposed 2% increase will be specifically allocated to the investment programme, ensuring it will not be diverted elsewhere. He noted, “A core council tax increase of 5% per annum, with the HIP earmarking of 2%, will be over and above this baseline.”
As the council navigates these complex financial waters, the decisions made in the coming months will have lasting implications for both the local government and the residents of the Highlands.
