Between A Rock And A Hard Place - Budget Pressures for Highland Council For 2026-27

25th January 2026

For perhaps the last 10 years Highland Council has had to make more and more difficult decisions on spending and services. Highland Council is expecting a budget gap of about £16.3 million for 2026/27, with similar gaps in later years (c.£16.2m in 2027/28 and £14.2m in 2028/29), according to its own planning documents. The council is seeking public views to help inform how to close this gap.

That means they must find ways to either:

Save money (including service reductions or efficiency savings),

Raise more income (e.g., charges or council tax),
or use reserves or new revenue sources.

Funding Context from Scottish Government

Scotland's local government funding is increasing only modestly in real terms. For most public services, funding for 2026-27 is forecast to grow by a very small amount (around 0.2 % once social security spending is excluded). That places pressure on councils to make tough choices if local costs rise faster than this grant.

Also, Audit Scotland reports councils across Scotland face a widening gap in funding that is expected to get even larger by 2026/27 adding to financial strain on councils like Highland.

What This Means for Services
Possible Service Reductions

Because overall core funding doesn't fully keep pace with rising costs (e.g., inflation, pay awards, rising social care demand), councils may need to make savings in non-statutory services to balance the books.

Although Highland Council's official consultation emphasises strategies such as growing housing and entrepreneurial income, it also admits there are "difficult decisions" about services as part of balancing the budget.

Non-statutory and discretionary services — like some leisure facilities, community centres, parks maintenance, transport subsidies or certain cultural programmes — are usually the areas most open to cuts first. While statutory services (e.g., social care, education, waste collection) are harder to cut dramatically, efficiency savings and reduced frequency or quality are sometimes proposed when budgets shrink.

Many councils are planning to cut back on bin collections, road repairs, libraries or leisure services and may raise council tax to mitigate pressures.

Protecting Essential Services

Council engagement material also suggests the council will seek to protect priority areas as far as possible, such as:

Education and school support

Social care

Infrastructure priorities

but balancing these against the budget gap means some harder choices will be necessary.

Council Tax: Likely Outcome

It's too early to confirm the exact percentage by the March 2026 meeting — but here's the backdrop:

In March 2025, Highland Council agreed a 7 % increase in council tax to help balance the previous budget.

For 2026/27, the council is allowed to set a new rate before mid-March, combining expected Scottish Government funding with local priorities.

The council itself is exploring "growing the number of houses" to increase the council tax base, showing it expects to use council tax income actively to help balance finances.

Given ongoing budget pressures, it's likely that Highland Council may propose another council tax rise in March 2026 though the exact percentage will depend on the settlement from the Scottish Government and local priorities. If the pattern of the previous year is any guide, this could be a single-digit rise rather than no increase, especially if the council needs to avoid deep service cuts.

What the Highland Council Budget Consultation Covered

The council ran a formal consultation and engagement exercise as part of preparing its March 2026 budget — asking residents and community groups for input on how spending should be prioritised and what savings or income-raising measures could be considered.

Budget Gap and Financial Challenge

The council projected a budget gap of around £16.3 million for 2026/27, with similarly sized gaps in the next couple of years.

Council officers emphasised the need to balance the budget through a mix of savings, income generation and careful prioritisation of services.

Key Themes in the Consultation & Options Considered

Participants were asked for views on a range of potential priorities and options, including:

Points Residents Were Asked to Consider

Income generation ideas — e.g., raising additional money from fees and charges, parking, other services, or targeting income from specific sources like second homes.

Council tax considerations, including whether levels should be increased and by how much (including options like higher charges on second homes).

Which services to protect — respondents were asked what matters most to them locally (e.g., waste collection, schools, care, roads).

Ways to save money — doing more things differently or more efficiently, e.g., outsourcing some work, restructuring services, or redesigning service delivery.

What Sort of Savings/Changes Were Being Discussed

While the formal consultation didn’t publish fully detailed savings lists to the public, it did outline the general areas the council was exploring:

Service Prioritisation

Councillors and officers were clear that statutory services (like social care and education) are generally protected where possible, but non-statutory services may be candidates for change or reduction.
These could include:

Leisure and community facilities

Some public realm services

Discretionary support initiatives

Residents were explicitly asked which services they viewed as least and most important when asked to prioritise funding.

Income Generation Focus

The council consultation suggested increasing income from:

Council Tax (including on second homes and long-term empty properties)

Fees and charges for services (e.g., parking, permits, leisure)

More entrepreneurial approaches — e.g., commercial leases or community benefit from energy development projects.

Views on Council Tax

During consultation:

Many participants indicated that moderate council tax increases could be acceptable as part of balancing the budget, especially if services were otherwise at risk.

Public engagement asked directly about acceptable levels of council tax increases and whether people saw higher tax as a way to avoid deeper cuts.

This input is used to help councillors decide the level of council tax uplift proposed formally in March 2026.

What This Means for Services & Council Tax

Based on the budget consultation framework and typical council practice:

Service Changes

More efficiency measures or service redesign (e.g., changing how services are delivered) are likely.

Some non-statutory services may be reduced or reprioritised if they are not considered essential by the public.

Statutory or essential services (education, social care, waste collections) are usually protected as far as possible, but are still under strain and may face efficiency reductions rather than outright cuts.

Council Tax

The consultation explored how people feel about increasing council tax to help balance the budget, and this is a live part of what councillors will decide in March.

Given the size of the budget gap and the income strategies discussed, another council tax increase (likely single-digit %) is plausible — similar to patterns seen in recent years.

The consultation period has ended.

About 60% of councils’ core ongoing funding comes from the Scottish Government (a block grant and other government grant streams), while around 20% is from locally-raised council tax.