Moray Council is set to become the first local authority in Scotland to raise council tax in nearly a decade.
None of Scotland’s 32 local authorities have increased tax since the Scottish Government introduced a freeze in 2007.
But Moray Council could now increase annual payments by 18% in a bid to meet an £11m deficit over the next financial year.
The move would increase council tax bills by between £136 and £408 and raise £5m over the next year, the local authority said.
It said the unexpected loss of £5m of Scottish Government funding in the latest budget and a £150,000 penalty for failing to meet teaching targets has compounded recent financial difficulties.
The local authority has identified £1.9m worth of savings and plans to use £5m of its £20m reserves to make up the rest of the deficit.
Council leader Stewart Cree said the latest budget had put services “seriously under threat”.
He said: “The administration group have examined all realistic options very closely, but this level of financial reduction has placed an entirely new dimension on our deliberations.
“While we will continue to look at further efficiencies, we have to recognise that there is no way we can achieve this level of savings by efficiencies alone.”
“Equally, we do not believe that the people of Moray should have to see the services and facilities that they cherish so much continue to deteriorate and that is why we have decided to consider increasing council tax to a level that would protect services both now and in the future.”
The plans will have to be approved at a meeting of all 26 Moray councillors, who include a 12-strong coalition of Independent and Conservative members, 11 SNP, two Labour and one non-aligned Tory.
Local authorities receive a flat payment each financial year in exchange for keeping council tax at its current rate, with extra funding added for things like free school meals and childcare.
The Scottish Government says the freeze saves the average Band D household £1200 a year.
Mr Cree added: “We are aware that we will have penalties imposed on us by the Scottish Government and we will forfeit the £1.1m that we are currently allocated to offset the council tax freeze.
“However, in light of the scale of the deficit we are facing, this £1.1m pales into insignificance when the only alternative would be further cuts to services, or even the loss of some services altogether.”
Impact of an 18% council tax increase:
Non-aligned Scottish Conservative Moray councillor Douglas Ross said: “It would be foolish for any council to increase council tax at this point, particularly when people have been promised a freeze and have budgeted for it.
“Local authorities would be better waiting to see what parties pledge in their manifestos for the Holyrood elections before making any decisions.
“If this increase were agreed next month a significant amount of the extra council tax generated would have to be paid back to central government rather than going into frontline services.
“The independent-led administration also don’t have the votes to get this through on their own, so rather than chasing headlines with drastic tax increase stories they should be looking further at where savings can be made and challenging the Scottish Government about the settlement we have been offered.”
A poll by the Highland Council found that 56% of 1000 respondents are against any increase in council tax next year. Around 62% voiced opposition to a suggested 10% rise.
The Highland Council has previously discussed raising tax and an end to the freeze is thought to be supported by the Independent-led council.