Councils repaid millions in Icelandic cash

LGA press release: 5 October 2009

Councils have already been repaid tens of millions of pounds that had been locked in the failed Icelandic banks, according to new figures from the Local Government Association.

Administrators for the banks have repaid almost £70 million to local authorities across the UK, with at least £30 million more expected to be repaid by the end of the year, according to the Local Government Association, which represents more than 350 councils in England and Wales.

Councils have been at the forefront of negotiations to recover deposits in four Icelandic banks and expect to get the lion’s share of the money back when the complex process of unwinding the banks' affairs is completed.

Initial payments were made by administrators for Heritable and Kaupthing Singer and Friedlander, which were registered in Britain.

Councils are confident that Iceland-registered Glitnir and Landsbanki will have funds to repay  local authorities who had deposits with the banks, but are awaiting the conclusion of the winding-up process by the Icelandic authorities.

The LGA and councils have been working hard with administrators in both the UK and Iceland to recover as much as possible from the failed banks. Their influence has meant that the total amount councils will recover from the UK-based banks will be higher than it might otherwise have been, and local authorities are in line for priority creditor status in repayments from the banks based in Iceland.

The LGA has made arrangements for all councils to share the costs of legal and financial advice to ensure council taxpayers' interests are safeguarded.  This has saved several million pounds compared with the alternative of each council working independently.

Through the LGA getting councils to act together local government representatives have been elected to the statutory creditor committees of Heritable and KSF, and appointed to the informal creditor committees for Glitnir and Landsbanki. 

Cllr Margaret Eaton, chairman of the Local Government Association, said: “The Local Government Association and individual councils have been working tirelessly to recover money frozen when these banks collapsed a year ago.

“It is good news we have secured tens of millions of pounds for council tax payers within months of the collapse and we fully expect that we will get the lion's share of this money back.

"The events of last October were part of a bigger financial crisis that affected not just councils but also other parts of the public sector as well as charities, businesses, individual savers and the Audit Commission.

"Money from council investments has generated hundreds of millions of pounds which has gone in to keeping council tax down and providing frontline services to local residents. It is in everyone’s interests that councils continue to invest and ensure that they are doing so prudently.

“Winding up the affairs of four foreign-owned banks is a very complex and time-consuming process, but council staff have worked flat-out to make sure that taxpayers are protected.”

ENDS