29th January 2026
Highland Council's high debt connects to local services and council tax, in practical, day-to-day terms.
Council debt doesn't pay for services directly — but it affects them.
Local authority debt is almost entirely capital borrowing (long-term loans), used for things like:
Schools and school refurbishments
Roads, bridges and transport infrastructure
Care facilities and housing
IT systems and major public buildings
Day-to-day services (teachers' salaries, refuse collection, social care staff, libraries, road maintenance, etc.) are paid for from the revenue budget, not from borrowing.
However
Debt must be repaid from the revenue budget every year.
That's the key link.
Annual debt repayments squeeze the services budget
Highland Council has to make annual loan repayments and interest payments (called debt servicing).
Because Highland’s debt per head is high:
A larger share of its yearly budget is locked in for repayments
That money cannot be spent on services
In simple terms:
Before deciding how many teachers, care workers or road repairs it can afford, the council must first pay its lenders.
When budgets are tight (as they have been for years), this means:
Less flexibility to protect services
Cuts or reductions fall more heavily on discretionary services (libraries, leisure centres, bus subsidies, road maintenance, youth services)
Why this hits Highland harder than some other councils
Highland faces a triple pressure:
Geography
Largest council area in the UK
Long roads, dispersed settlements
Infrastructure costs more per person than in cities
Population size
Smaller population to spread costs over
Debt per resident is therefore high
Past investment choices
Large capital programmes (schools, infrastructure)
Long-term benefits, but repayments are happening now
So even if two councils pay the same total debt repayment:
Highland has fewer taxpayers and service users to absorb the cost
How this links to council tax
Council tax is one of the few taxes councils can control, but it covers only part of total spending.
What council tax actually does
Council tax contributes to:
General services
AND indirectly to debt repayments (because repayments come from the same revenue pot)
When debt servicing costs rise:
The council either
Cuts services
Raises council tax
Or (most often) does a bit of both
Why council tax rises don’t "fix" the problem
Even a large council tax increase raises relatively little compared with total spending needs
Much of the extra money gets absorbed by:
Inflation
Pay settlements
Energy costs
Debt repayments
So residents may see:
Higher council tax, but still fewer services
Why debt can still be justified — but risky
It’s important to be balanced:
Why borrowing made sense
Schools and infrastructure last decades
Borrowing spreads cost across generations who benefit
Not borrowing would have meant worse buildings and services earlier
Where the risk lies
Rising interest rates increase repayment costs
Flat or falling government funding makes repayments harder
High debt limits options when crises hit
High debt doesn’t mean bankruptcy, but it does mean:
Tougher budget decisions
Less room to respond to local needs
Greater pressure for service reform, centralisation, or withdrawal
6. Bottom line (plain English)
Highland’s high debt per head doesn’t automatically mean mismanagement
But it reduces the money available for everyday services
It increases pressure for:
Service cuts or redesigns
Council tax rises
Fewer local choices