Magazine article Public Finance

Fire and Ice

Magazine article Public Finance

Fire and Ice

Article excerpt

It seems that councils, police and fire authorities, charities and universities will be disappointed in their calls for the government to guarantee deposits totalling more than £lbn in the stricken Icelandic banks.

Ministers have promised aid and said that councils are not on their own, but have stuck to the line that public bodies are 'more informed investors' than your average high-street saver.

That may be so, but three councils are already receiving urgent financial advice and a further ten have also admitted to facing short-term difficulties because of their Icelandic investments.

But, as the Local Government Association has said, the main issue now is to get the money back from Iceland.

The good news is that the book value of Icelandic assets should cover their liabilities. And local government minister John I tealey has promised to consider options such as allowing councils to borrow against their losses.

Elsewhere, support for town halls has been in short supply. Lord Oakeshott of the I Jberal Democrats described authorities that had invested in Iceland within the past month as 'blind and deaf.

The LGA in turn, has pointed the finger at credit rating agencies, although it also conceded that councils making deposits after September 30 should investigate why such investments had gone ahead. …

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