Clarity Needed on Missing Pounds 1bn; ECONOMIC CRISIS Confusion Is the Key Word in Commons
Byline: William Green Political Editor
COUNCIL chiefs last night appeared to admit it was unclear where up to pounds 1bn of taxpayers' money is after being caught in the Icelandic banking collapse.
The Local Government Association (LGA) said it was seeking "clarification" on where the cash was in the financial system and when town halls might get money back in evidence to MPs investigating the fiasco - with pounds 23m invested by Northumberland County Council now potentially lost.
A county council treasury chief also told the Commons local government committee that "diplomatic considerations" between Iceland and Britain were making the situation more complex to resolve.
And in a confusing twist, Northumberland's financial advisers said they did not provide advice on which financial institutions or countries to invest in - although the county council's website appeared to suggest otherwise.
Last night, Northumberland's executive member for corporate services Andrew Tebbutt said: "I think I shall have to have a discussion with our finance director Steven Mason tomorrow. That is quite surprising."
Blyth Valley MP Ronnie Campbell said the situation was a mess, adding: "The county council kept putting in their money when everybody was warned off."
The Labour MP added it reflected the wider chaos within the banking system.
"I find the whole thing staggering. I don't think even Gordon Brown or the great financial advisers know what the hell is going on," he said. David Whelan, managing director of Sector, told MPs his company provided advice on a range of areas and input into investment strategies for councils within national guidelines.
"I would like to make it quite clear that we do not provide advice to local authorities on which financial institutions or sovereign states to place their funds," added Mr Whelan.
He said his company passed on information from credit rating agencies - which judge the strength of banks - when giving evidence to the Commons local government committee.
Mr Whelan said information was passed as soon as it arrived and collated on a monthly report sent out to clients, although problems were not specifically highlighted.
"We don't know where local authorities place their funds. We are not part of that decision-making process," he said.
Evidence submitted by Sector also said cash deposits with Icelandic banks were not lost, although repayment of money and interest earned were "suspended for the foreseeable future". His comments come after Northumberland County Council invested pounds 23m with collapsed Icelandic institutions Glitner Bank, Landesbanki, Kaupthing, Singer and Friendlander (KSF) and Heritable Bank.
In evidence to Commons local government committee, the LGA said it was "too early" to provide a realistic estimate of when and how much money would be returned from Heritable and KSF. In the case of Glitner and Lansbanki, the LGA said it was seeking "clarification" on whether local government deposits had been transferred to new state-owned banks set up following the Icelandic bank collapse and what repayment priority they were being given.
Committee member Clive Betts said councils would have been better to have paid middle-managers to read the financial pages of newspapers, which long warned of problems with Icelandic banks before they affected UK councils.
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Publication information: Article title: Clarity Needed on Missing Pounds 1bn; ECONOMIC CRISIS Confusion Is the Key Word in Commons. Contributors: Not available. Newspaper title: The Journal (Newcastle, England). Publication date: January 27, 2009. Page number: 8. © 2009 MGN Ltd. COPYRIGHT 2009 Gale Group.
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