10th May 2026
The financial pressures facing both the Scottish Government and councils could create major risks for ambitious long-term capital programmes such as The Highland Council’s Highland Investment Plan (HIP), including the proposed £100 million redevelopment of Thurso High School into a major community campus. However, the picture is complicated because projects like Thurso are also politically and economically important for the region.
The council’s Highland Investment Plan is extremely ambitious by Scottish local authority standards. It involves around £2.1 billion of investment over 20 years, including schools, roads, depots and integrated “Points of Delivery” community hubs.
The proposed Thurso project is one of the flagship schemes. It would replace ageing school buildings and potentially combine secondary education, primary provision, sports facilities, community services and links with UHI into a major civic campus.
But large capital programmes become much harder to sustain when governments face structural deficits and rising borrowing costs.
One major issue is interest rates. Highland Council intends to finance much of the HIP through borrowing combined with a ring-fenced 2% council tax allocation.
That model works much better when borrowing is cheap. If UK government borrowing costs remain elevated, councils face much higher repayment costs over decades. A project that looked affordable in 2021 or 2022 may look far more expensive by 2026 or 2027.
Construction inflation is another huge problem. Across Scotland, school and infrastructure projects have seen major increases in material, labour and energy costs since the pandemic. A £100 million estimate today could become significantly higher before completion. That creates pressure either to borrow more, reduce the scope of projects, or delay phases.
In practical terms, several things could happen to the Thurso campus and other Highland projects.
The first possibility is phasing. Rather than cancelling projects outright, councils often spread them over longer timescales. That could mean the Thurso development proceeds in stages over many years rather than as one large build.
For example:
the high school replacement may proceed first
leisure or community facilities may come later
some elements could be redesigned or scaled down
linked housing or innovation projects may be postponed
This is probably the most likely scenario because Thurso High School already has known structural problems including RAAC/HACC-related concerns in parts of the estate. That makes complete cancellation politically difficult.
Another possibility is greater reliance on partnership funding. Highland Council is already discussing integrating NHS, education, community and UHI facilities together.
That could evolve further into:
shared funding with NHS Highland
Scottish Government regeneration grants
private sector involvement
community trust partnerships
revised financing models similar to older PPP/NPD structures
However, Scotland remains politically wary of older PFI-style financing because many councils ended up paying far more over the long term than original construction costs. Some councils are only now escaping those expensive legacy deals.
The wider danger is that operational budget pressures begin consuming money that would otherwise support borrowing repayments.
If the Scottish Government reduces real-terms funding growth to councils, Highland may face rising pressures in:
social care
ASN education support
homelessness
transport
roads maintenance
staff pay
That can force councils into difficult trade-offs between maintaining day-to-day services and funding long-term infrastructure.
Rural councils such as Highland are especially vulnerable because they face unusually high delivery costs across huge geographic areas. Even basic infrastructure maintenance costs are substantially higher than in urban councils.
There is also a political dimension. Projects such as the Thurso campus are partly designed to tackle depopulation and economic decline in remote areas. The council repeatedly describes the project as “generational” investment aimed at sustaining communities and attracting families.
That gives projects like Thurso stronger political protection than some other capital schemes because cancelling them could reinforce perceptions that Caithness and remote Highland communities are being neglected.
At the same time, if finances deteriorate sharply, councils often prioritise statutory services first and capital ambition second. History suggests that in difficult financial periods Scottish councils typically:
defer major projects
reduce project specifications
extend borrowing periods
sell assets to fund projects
consolidate schools and offices into fewer buildings
postpone maintenance elsewhere
Ironically, Highland’s “Point of Delivery” model may itself be partly a response to future austerity pressures. By combining schools, offices, depots and public services into shared facilities, the council hopes to reduce long-term operating costs through fewer buildings and lower maintenance bills.
So projects like Thurso may survive precisely because they are intended to save money later.
The biggest risk may therefore not be outright cancellation, but slower delivery and reduced scope. Communities expecting rapid transformation could instead see projects unfold over a decade or more as Highland Council tries to balance borrowing limits, rising costs and tightening Scottish Government finances.