New regulations have been drawn up that will allow local authorities to postpone the budgetary impact of any losses they incur through last year’s collapse of the Icelandic banks. The Local Government Minister, John Healey, has laid regulations before Parliament to protect people from potential service cuts or council tax increases while efforts continue to recover the money that was invested in Iceland.
The change would enable councils to postpone any possible effects until 2010-11. New statistics published at the same time show that at the end of last year 125 English local authorities had outstanding investments of around 923.2 million pounds in Icelandic banks. The Government said that without action the councils would have to make immediate provision for possible losses in their revenue budgets and that would have potentially serious impacts on council tax or services.
The new regulations will come into force at the end of the month and will neutralise the revenue charges for the losses required by accounting practice. Any council taking advantage of the relief will be required to make the charges in 2010-11 by which time the affected authorities will have a clearer picture of how much of their investments they will get back.
The Government is still working closely with the banks involved and the Icelandic authorities to help councils and other creditors recover their money. Mr. Healey said he was concerned that under normal financial rules the risk of the money being lost would have to be taken into account in council budgets. “That’s why I am taking this exceptional step that gives authorities some breathing space that should allow them to be clearer what sums, if any, are still at risk. Meanwhile the Government will continue its efforts to ensure that investors recover as much as possible from the banks,” he said.