Highland Council chiefs are poised to discuss tax rises to plug a £41 million budget gap.
Local authority leader Raymond Bremner said talks are due to start on ways to tackle the “big, big challenge” facing council finances.
But he said councillors will consider the impact council tax hikes would have on residents already struggling with soaring bills in the current cost of living crisis.
Councils will discover the details of their funding settlement for the coming year in a memo from the Scottish Government on Monday.
John Swinney, the deputy first minister, said in his budget speech last week that local authorities would receive an extra £570 million, as well as the “flexibility” to raise council tax.
But local government umbrella body Cosla said in reality the uplift was worth £71 million, when previously agreed policy commitments are excluded.
The shortfall led to claims thousands of jobs will be put at risk, services face the axe, and council tax could soar.
Last year, local authorities were given complete freedom to raise council tax for the first time since the SNP came to power, with the majority, including Highland, increasing by 3%.
Mr Swinney said last week councils would again be given “full flexibility to set the council tax rate that is appropriate for their local authority are”.
Highland Council budget
Mr Bremner said Highland Council would need to “take some time” to consider the implications of the budget.
“It’s a big, big challenge for Highland Council to be able to reduce its forecast budget gap of nearly £41 million,” he said.
The SNP councillor for Wick and East Caithness said it was vital to understand what kind of flexibility councils will have, as well as their share of any new funding.
“That’s going to have a key influence on how we consider what remains of the budget gap and how we close that,” he said.
“That includes service fees and service charges, and to what extent we’re going to need to look at increasing them, and that includes council tax.
“One of the key considerations is understanding to what extent council tax rises will have on communities, because they are already seeing considerable increases in the cost of living, fuel costs.”
Katie Hagmann, resources spokeswoman for Cosla, said local authority leaders met on Friday to discuss the budget.
“There was disappointment across the board that unfortunately, the settlement that local government had received as part of the budget is far short of what we were looking for,” she told the Sunday Show on BBC Scotland.
Cosla had been lobbying for a settlement of at least £1 billion, including £600m to “stand still” in the face of rising costs, and another £100 million per 1% of a pay increase for council workers.
Councillor Hagmann said that when you take out previously agreed funding and cash for specific policies, there was only an increase of £71 million.
‘Really difficult choices’
“It means that there will be really difficult choices that local authorities are going to have to make,” she said.
Meanwhile, Jim Thewliss, general secretary of School Leaders Scotland, warned the budget squeeze is “starting to bite” in classrooms.
He said staff vacancies were going unfilled, while class sizes were going up and subject choice for pupils was being impacted.
Mr Swinney defended the settlement on the Sunday Show.
“Budget to budget, the local government settlement is up by £570 million,” he said.
“Local government came to me and asked for £1 billion. I said up front there was just no way I was going to be able to achieve that.
“But I have managed to put £570 million into the local government settlement.”
Scottish Liberal Democrat leader Alex Cole-Hamilton said the Scottish Government was “squeezing councils and education to the pips”.
He added: “Local authorities need both a fair deal from the Scottish Government and a power surge that recognises the important work that they do.
“They need new hope, not another ministerial takeover of social care and a billion-pound bureaucracy that would trample over local services once again.”
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