Councils' ?43M Loss in Banks Disaster

Beginning of article

Byline: John Robertson

SEVEN Scottish councils were last night plunged into a cash crisis as it emerged they have lost ?43million in Iceland's collapsed banks.

The money was invested in three Icelandic banks which failed earlier this month as part of the global financial crisis.

That debacle leaves the councils with multi-million pound holes in their budgets - and no apparent means of recovering the cash.

But their plight is dwarfed by the catastrophe south of the Border, where local authorities had invested more than ?700million in the Icelandic institutions.

Chancellor Alistair Darling has signalled that the Treasury will not bail out the councils. He said that while private individuals with cash in the banks would be protected, councils were 'more of an informed investor'.

All Holyrood Finance Secretary John Swinney could do was write to the Chancellor asking for reassurance that all deposits will be covered.

Meanwhile, Gordon Brown threatened legal action against the Icelandic government as he condemned its response to the country's bank collapses as 'totally unacceptable'.

The local authorities hit by the global economic chaos had invested in troubled Icelandic institutions Landsbanki, Heritable and Glitnir.

North Ayrshire Council appears to be the biggest loser with ?15million invested, …