Local authorities are required to invest the first 50% of income generated from second homes and long term empty properties in housing.

However, council leader Raymond Bremner has written to the Depute First Minister, John Swinney, asking for permission to repurpose this income over the next two years as it negotiates its biggest ever funding shortfall.

The local authority is forecasting a budget deficit of £126.9m over the next five years and say the largest element of this gap (£49.2m) falls in the coming year and will require “substantial transformative activity”.

Mr Bremner said people in the Highlands were facing some of the highest rises in the cost of living. A 4% uplift in council tax was agreed at this week’s budget meeting, one of the lowest in Scotland.

He said: “We are facing a perfect storm of circumstances with inflation at the highest levels, rising interest rates and a cost of living crisis. This is confounded by uncertainty around future pressures and risks and a lack of clarity on ring-fenced funding.

“In setting this budget, we have tried to be fair. We have focused on removing duplication and over-provision and making sure our services are affordable.

He added: “We have carefully considered where we target our spending and have chosen to invest in improving our roads, reducing our waste, supporting children and families, and protecting jobs.”

Convener Bill Lobban added: “Everyone is affected by the cost of living crisis. We recognise the pressures on people across Highland and have therefore limited the Council Tax increase to the lowest we can at 4%, despite higher rises elsewhere, in order to protect low-income families and those experiencing in-work poverty.

“This is a budget which, as much as possible protects jobs and services, has only been made possible due to the sound financial management of both the current and previous Administration in building Reserves for hard times such as this.”

He added: “Although a budget has been agreed for the coming year, money in Reserves can only be used once. Therefore, the task will begin immediately, building on our redesign and transformation work, to develop a sustainable budget for future years.”