Magazine article Public Finance

Councils Attack 'Irrational' and 'Unjust' Capitalisation Decision

Magazine article Public Finance

Councils Attack 'Irrational' and 'Unjust' Capitalisation Decision

Article excerpt

Local authorities facing millions of pounds worth of potential losses following the collapse of die Icelandic banks are challenging the government's 'irrational' decision to allow only some councils to spread their losses.

The Local Government Association wrote to the Department for Communities and Local Government on February 22, querying its 2009/10 capitalisation directions on behalf of eight councils.

The local authorities, led by the London Borough of Hillingdon, are threatening to take the matter to judicial review. They are unhappy that most councils that applied for the right to register their Iceland losses in several years' worth of accounts, rather than just one, were turned down.

The 2009/10 directions, released earlier this month, show that £72.6m in 'exceptional' capitalisation was approved for 19 councils, but there were 31 unsuccessful applications.

Among the successful applicants were the London Borough of Haringey, which had £37m invested in Iceland and had applied for film capitalisation, Plymouth City Council and Northumberland County Council.

Hillingdon council leader Ray Puddifoot said the department had behaved illogically and not explained its reasoning. 'It's such an irrational decision,' he told Public Finance. 'It's an injustice, an absolute nonsense. What is the government saying? That Hillingdon should be more on the ball, but Haringey are Haringey and you can't expect them to know any better?'

Hillingdon had £20m invested in Iceland at the time of the crash and is currently estimating losses of £3m. …

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