Moray Council is poised to perform an embarrassing U-turn on their controversial plans to increase council tax.
Local authority bosses tabled drastic measures to increase the tax by 18% in an effort to plug a massive budgetary gap.
But the Scottish Government has insisted on the charge remaining frozen at 2007 levels across the nation, and threatened to deprive Moray Council of millions of pounds if it implemented the proposal.
Last night, embattled council leader Stewart Cree conceded it was likely the local authority “would have to look at other options”.
Mr Cree previously said that raising council tax was the only way the authority could make the savings which were needed without inflicting huge public service cuts.
However, he maintained that cutting services would remain a last resort should the proposed council tax increase be scrapped.
The council’s ruling administration group embarked on the “previously unthinkable option” after a £5million reduction in government funding left the body facing a deficit of more than £11million.
The authority calculated that an 18% council tax increase would raise £5million, which would balance its books when coupled with £5million from reserves, allied to a further £1million from in-house reductions.
But the Scottish Government has announced sanctions which would deprive the council of £5million if it forged ahead with the proposal.
Finance Secretary John Swinney ruled that Moray Council could lose shares of funding reserved for maintaining teacher numbers and integrating health and social care.
Mr Cree has spent the last two days involved in crucial talks with national council chiefs Cosla in Edinburgh.
Returning home last night, he described Mr Swinney’s announcement as “a bombshell”.
He added: “We would originally have faced a £1million penalty for raising council tax, which I thought was disgraceful.
“I don’t see why the people of Moray should pay any penalty for choosing to keep their services.
“But the rules seem to have changed, and that penalty will now reach more than £5million – so effectively all the money amassed by raising the council tax would go towards paying that fine.
“That has made the prospect of applying the council tax increase distinctly less palatable.”
Mr Cree added that he maintained an “earnest desire” to shield principal services from cuts, and he aims to thrash out alternative ways to make savings during crisis talks on Monday.
Fellow administration member, George Alexander voiced fears that Holyrood ministers had “beaten the council into submission”.
The Forres representative said: “To be able to cover the cost of the penalties we are now faced with, the council tax would have to be increased by 36%.
“It seems like we have been beaten into submission basically, and the move has become a lot less attractive.
“It’s a pity, because a lot of people would have been happy to pay an 18% increase if it meant protecting services from cuts.”
The Finance Minister says that research has proved that the Scottish Government has overfunded local authorities while the council tax freeze has been in place.
He said it was important the freeze remained in place to help Scottish families pay bills, and said funding offered to local authorities for maintaining the levy at 2007 levels would help pay for services.
Administration members unveiled the radical proposal at a meeting on Wednesday, January 13.
The announcement sent ripples across Scotland, and sparked speculation that other struggling authorities could join the body in defying Holyrood orders by upping the charge.
But Moray ended up on their own. And now they face the prospect of a swift climbdown.