Councils' ?43M Loss in Banks Disaster
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, followed by Scottish Borders Council which has ?10million tied up in the failed banks.
South Lanarkshire has ?5million invested with Landsbanki and a further ?2.5million with Heritable.
South Ayrshire has ?5million worth of deposits and Moray ?2million.
East Ayrshire puts its liabilities at between ?3million and ?5million, Perth and Kinross ?1million, with Moray facing a loss of up to ?2million. But all that pales in comparison to losses south of the Border, with Kent County Council alone having deposited ?50million.
None of Scotland's eight police forces have invested but 15 forces south of the Border and Transport for London have put more than ?145million into Icelandic banks.
Council tax rises and cuts to services in the worst hit authorities in England and Wales seem inevitable but all of the Scottish authorities involved insisted there would be no impact on public services.
A Scottish Executive spokes- man said: 'We are in touch with [councils' umbrella organisation] Cosla to clarify the overall sums involved but we understand they are very significantly less than the hundreds of millions of pounds that councils in England are reported to have on deposit.
'Financial regulation is a reserved matter and therefore Finance Secretary John Swinney wrote to the Chancellor this morning to seek specific reassurance from the UK Government that all deposits by local authorities in all banks, based both in the UK and elsewhere, are afforded the same protection as the safeguards the UK Government put in place in relation to certain Icelandic banks and accounts yesterday.' Scottish Labour finance spokesman Andy Kerr backed the call on the UK Government to treat affected councils across the UK equally.
He said: 'I understand that at least one Scottish council has written to the Treasury asking for assurances about the safety of its deposits.
'I expect assurances from the Treasury that there is no disparity between the way that Scottish local authorities are treated and those in the other parts of the UK.' Cosla president Pat Watters, a South Lanarkshire councillor, said: 'A small number of Scottish councils have investments with Icelandic banks.
'Both national government in Scotland and the UK are making every effort to ensure those investments are secured.
We are fully supportive of all the efforts being made.'
Q & A
Why do councils invest - or gamble with - large sums of taxpayers' …
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Publication information: Article title: Councils' ?43M Loss in Banks Disaster. Contributors: Not available. Newspaper title: Daily Mail (London). Publication date: October 10, 2008. Page number: 8. © 2007 Daily Mail. COPYRIGHT 2008 Gale Group.
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