Local Authorities Lose Millions of Ratepayers Money on Iceland Deposits

hitch_2

News just breaking now, millions lost

KorkyKat

Here you are.

LONDON, Oct 8 (Reuters) - British local authorities called on the government on Wednesday to protect investments made by at least 20 councils in Iceland's troubled Landsbanki (LAIS.IC: Quote, Profile, Research, Stock Buzz).

The Local Government Association, which represents more than 400 councils in England and Wales, has written to finance minister Alistair Darling to request a meeting.

The LGA wants the same assurance Britain has given to individual savers that all money invested in Landsbanki's Internet bank IceSave will be fully protected. Landsbanki was taken under Icelandic government control this week as the country moved to stave off national bankruptcy.

"We are today seeking an assurance from the chancellor that councils' assets will be protected in the same way as personal assets. Town halls invested in Landsbanki as a reputable bank with a solid credit rating," LGA chairman Margaret Eaton said.

"In the short term, these councils are confident that they will have sufficient funds to tide them over for a considerable period of time," she said.

The opposition Conservative Party estimates local authorities in England and Wales have invested up to 40 million pounds ($70.27 million) in Icelandic banks, but there is no official figure.

Prime Minister Gordon Brown's official spokesman said the government was ready to meet with British local authorities.

"Of course we understand the issues in relation to local authorities and the government stands ready to sit down and discuss with local authorities any particular issues that may arise," he said.

"At the moment it is very difficult to get much, if any, information out of the Icelandic authorities.

IceSave stopped taking deposits or any withdrawal requests on Tuesday.

Darling said on Wednesday the government would protect deposits of British savers. Brown also said the government would take legal action to try to recover money invested in the bank.

The Conservative Party said it feared problems ahead.

"The breakdown of these Icelandic banks will create immediate problems with cash flow for the local authorities unable to take their money out, and raises the possible prospect of a massive financial shock if -- in a worst case scenario -- the investments are unrecoverable in whole or part," it said.

"This in turn will threaten council tax hikes or cuts in local services. An informal telephone survey today by the Conservative Party has identified a range of councils, with exposure up to 40 million pounds."

(Reporting by Frank Prenesti, editing by Mark Trevelyan)

amcluesent

Iceland. EPIC Fail! They owe us a load of cod.

SouthCoast

History has a habit of repeating itself.

Its collapse, owing £9 billion, exposed the biggest ever bank fraud. It left British small businesses owed £600 million. UK local authorities that had been attracted by suspiciously high interest rates had to raise council tax for up to a decade. Sheikh Zayed of Abu Dhabi lost his own money and, as the controlling owner of BCCI at the time of its collapse, was honourably obliged to compensate other creditors. Deloitte, the accountancy firm appointed liquidator, won, in the words of a former partner, “the biggest professional assignment ever, anywhere in the world”.

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article585992.ece

Mandark

The BBC is saying Kent had £50m with Icesave. All gone now!!!

IT_nerd

What. The. !!!!.

Even our own government doesn't keep money inside the UK... What the?

hitch_2

All in the pusuit of an extra quarter of a percent, why dont they invest their spare cash with the Bank of England, crazy or what.

IT_nerd

hitch wrote: »

All in the pusuit of an extra quarter of a percent, why dont they invest their spare cash with the Bank of England, crazy or what.

£125K odd though. Soon adds up.

EalingSaver

Given the level of waste & competence of local councils, if I'd know they had been using IceSave I would have got seriously worried a lot lot earlier... :-)

Seajays

A few more references...

"The LGA wants the same assurance Britain has given to individual savers that all money invested in Landsbanki's Internet bank IceSave will be fully protected."
http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSL833625920081008

"The LGA is aware of at least 20 councils that had money in Landbanksi or one of its subsidiaries. Some investments are thought to run into the low tens of millions."
http://www.guardian.co.uk/politics/2008/oct/08/localgovernment.economy

Letter from Margaret Eaton to the Chancellor
http://www.localgov.co.uk/index.cfm?method=news.detail&id=71830

So that'll be council tax going up as well then...

Mandark

Becoming a huge story now as hundreds of millions may be lost. Sky News interviewing lots of council people.