LGA: 108 councils have £800m deposited in Icelandic banks

The Local Government Association has revealed that 108 of its member authorities in England and Wales have almost £800m deposited in Iceland, where a string of banks have collapsed.

The news followed a meeting between LGA leaders and ministers from the Treasury and Department of Communities and Local Government over the association’s push to have councils’ deposits guaranteed by the government.

The LGA had also called for short-term measures to be taken to help any council that fell into difficulty, including allowing authorities to temporarily retain business rates collected locally, rather than pass them to the Treasury.

Very productive

In a joint statement, both sides described yesterday’s meeting as “very productive” and said that any authorities facing “severe short-term difficulties” as a result of the Icelandic financial crisis would receive support on a case-by-case basis.

The statement said that in previous situations, councils have received support to restructure their financial priorities, been provided with additional expertise and been permitted to finance expenditure from borrowing or the sale of assets.

It added that many authorities have said there are no risks to frontline services and that there was no evidence of recklessness by councils.

Icesave

Banks taken over by the Icelandic government include Landsbanki, which runs the Icesave scheme, which has a number of UK customers.

The Westminster government has promised to ensure that no individual saver is penalised by its collapse and has frozen the UK assets of Landsbanki in this country, which it said would help “wholesale depositors” such as councils.

In a statement, the Icelandic government said there was a “good probability” that Landsbanki’s assets would be sufficient to cover deposits in Icesave.

• Do you feel concerned about your local authority’s financial health? Have your say on CareSpace.

Related articles

LGA urges action to protect councils hit by Iceland crash