The local authority said it faces a £26m gap in its budget next year and is struggling with an “unprecedented degree” of uncertainty over its finances.

Options for potential saving will be provided once the Scottish Government’s council funding settlement is announced on December 15.

The council said it will likely have to make cuts totalling between £47m and £72m over three years from 2017/18.

The council said: “If the grant settlement is a cut of around 4 per cent again, this would result in recurring real reductions in funding and the council will need to reduce or stop doing functions. Our choices of where to make savings are very much restricted by the Scottish Government. For example, a quarter of our budget is in teachers’ salaries and we have been required to maintain teacher numbers.

“Every 1 per cent reduction in grant equates to approximately £4.4m less funding. Taking into account anticipated levels of funding, budget pressures and a council tax rise of 3 per cent, savings required are forecast to be between £47m to £72m over the next 3 years.

“Budget pressures include inflation, pay and pension uplifts, additional legislative costs, or the inability to deliver all of the previously agreed savings. Budget pressures are estimated to be around £14 million next year and around £10 million in subsequent years.”

Leader of the council, Margaret Davidson, said: “This is really is the most worrying financial situation. Local Government is undoubtedly shrinking. £10m came out of our revenue budget in February 2016 and we expect to be 25 per cent smaller in 3 years’ time.

“Our hands are very tied by the constrictions imposed by the Scottish Government. This will mean that budget reductions will be much higher for services which are not ring-fenced or protected by Scottish Government policy. Unprotected services could have to find 23 per cent savings. We will need to discuss options with communities and we want to offer communities the opportunity to help themselves to provide some services locally, where the council can no longer do so.”

She added: “The scenario which I find most unpalatable is that taxes raised locally in Highland may be taken from us to be spent elsewhere in Scotland. This would be the first time any government in Scotland has raised taxes locally and taken them away for national purposes and I will be bringing a motion to council to challenge this proposal.

“The current budget situation and future scenarios is an issue for all political groups and all 80 members have a responsibility to balance the budget. The Administration will be continuing to work together across the chamber to find consensus on the way forward in what is the most dire financial situation the council has ever faced.”