The increase together with a range of efficiency and management savings will be required to close the budget gap of £34 million.

Inflation is a very significant factor in setting the budget for the coming year. The rising cost of fuel, labour and materials impacts on both the Council’s direct and indirect costs and the level of budget pressures is much higher than it has been in recent years, a large part of which is due to £8.2m of contractual cost increases linked to inflationary factors. A prolonged environment with high levels of inflation may lead to budget overspends, as well as widen budget gaps for future years.

The council, however, recognises the impact of increasing inflation on households across the Highlands and therefore has proposed a rate much lower than the current CPI level of inflation.

A 3% increase on Council Tax Band D for 2022-23 is equivalent to an extra 77p per week.

Households in Council Tax bands A-D will automatically receive the Scottish Government’s £150 Cost of Living award. When this is applied, those living in a Band D property will see their 22-23 council tax bill reduce by £110.03 (£2.12 less each week).

Just over 16,000 households in Highland qualify for means-tested council tax reduction and those in receipt of council tax reduction in council tax Bands E-H will also receive the Cost of Living Award.

Margaret Davidson, leader of the council, said: “We recognise the huge impact of rising food and fuel bills on people across Highland and so we have tried to absorb some of the pain of inflation by keeping the proposed rise in council tax to well below current inflation rates. The most vulnerable households will already be in receipt of council tax reduction which will mitigate any increase.”

Councillor Jimmy Gray added: “It is a legal requirement that Members agree the rates for Council Tax for the coming year before the 11th March and we understand that the majority of local authorities across Scotland are proposing council tax increases of 3%.”

The budget proposals will be considered by council on March 3.