Headlines: October 10th, 2008

The Local Government Association and the Government are to continue monitoring the impact of the failure of Icelandic banks on councils who had invested more than three-quarters of a billion pounds with them. The LGA is to analyse the effects on individual councils.

In a joint statement last night the Association and the Government agreed that no authority had acted improperly or recklessly in investing in the Icelandic banks. They said the financial framework for local authorities, under which they have to strike an appropriate balance between the security of investments and the returns on their money, appeared to have been kept to.

After meeting the Local Government Minister, John Healy, and Treasury Ministers Ian Pearson and Stephen Timms, the LGA said it had received reports from its members revealing that 108 councils had deposited 798.95 million pounds in Icelandic banks. Other reports suggest that when investments by fifteen Police Authorities and Transport for London are taken into account the totals rises to more than 890 million pounds. Investments by local authorities range from a number with a million pounds on deposit to larger councils such as Kent County Council which has 50 million pounds at risk and Nottingham City Council which has 42 million.

A number of the councils involved have made it clear that there is no threat to frontline services but the joint statement said a small number of authorities might have specific problems. The statement continued, “We agreed once the LGA completed its analysis of the effects of the situation on individual local authorities, we will look at issues arising on a case by case basis. For those local authorities who are facing severe short-term difficulties Government and the LGA will agree an appropriate set of ways to assist.”

On previous occasions support has included councils being helped to restructure their financial priorities, the provision of additional expertise and the capitalisation of expenditure.