LGA battles for taxpayers’ money

Local government leaders held back to back talks this week with government ministers and Icelandic officials to recover as much of councils’ and taxpayers’ money as possible following the collapse of Iceland’s banks.

It was the second time that the LGA and the government have met to discuss how to ensure that councils do not lose money because of the failure of the Icelandic banking system. In a joint statement the government and the LGA said they would continue to work with the administrators and the Icelandic authorities to get the best and most rapid resolution.

The LGA is aware of 123 councils with £919.6m invested in Icelandic banks and their UK licensed subsidiaries. Thirteen councils have said they may face short-term difficulties but the LGA does not believe that frontline services will suffer or that wages will not be paid.

The government and the LGA have set up a rapid response unit to help any local authorities in severe difficulty. Financial experts will immediately begin working with three councils with a further 10 receiving specialist support. They will report back to the government and the LGA. The LGA believes no councils are in danger of cutting services, but it has called for an inquiry into the advice given to councils by credit rating agencies. Funds from councils are now locked up in the failed banks, along with deposits belonging to individual savers.

Cllr Margaret Eaton, chairman of the LGA, also met the Icelandic ambassador (pictured) looking for reassurance that council funds caught up in the troubled banks will be prioritised when creditors start being paid back. She said: “Getting back the millions of pounds of taxpayers’ money councils have invested in Iceland’s banks remains our number one priority.

“Councils do not take decisions lightly where public money is concerned but have followed government guidelines, building contingency funds for just the kind of economic emergency the country is now facing.

“I’m grateful to the Icelandic ambassador for agreeing to meet with the LGA and look forward to getting further reassurances that British funds put into the country’s banks in good faith will be at the top of the pile when creditors are paid back.”