Wednesday, October 08, 2008

Icelandic shock for our Councils.

Yesterday, I posted about the possible impact of the financial difficulties being experienced by Iceland's banks on local authorities. I did know of one council with high exposure, but did not want to name it. But I did expect the media to ask various Councils what the position is. It seems that its much, much worse than I thought - or could possibly have imagined. This afternoon, the Conservative Party issued a press release which outlined the impact in the London area - around £140 million at risk. Tomorrow, both the BBC and the Montgomeryshire County Times will be outlining the details of how the crisis effects Powys County Council. I will leave them to divulge the details, which were issued by the Council's Press Office earlier today. It's truly frightening.

I have no criticism of the council's involved. Until the day before yesterday, there was no reason to suspect a problem. The Icelandic banks had been offering a slightly better return, and Councils have been encouraged to secure best value on their temporary investments. But it all changed yesterday morning. Its clear that the highly leveraged Icelandic banks are in big trouble. Two have already been nationalised, including Landsbanki, which I understand has a lot of UK investment. And it seems that the Icelandic Government is favouring the deposits of Icelandic nationals over foreign investors. This equals major problem.

This is a massive issue. We are talking many millions of pounds. Councils must be extremely nervous about the possible implications for local services and Council taxpayers. I do hope there will be a quick response by Government to put our councils and taxpayers mind at rest - like tomorrow.


Anonymous said...

Sorry Glyn, but the awful state of Iceland's finances has been known for months - Welsh councils should have been aware of this and responded appropriately.

Glyn Davies said...

anon - I learn that Telford and Wrekin did have £6 million invested with Icelandic banks, but withdrew it all - so you may well have a point. The information available to them would have been available to others as well. All I do know is that councils have a statutory duty to seek out the highest returns, and until this week Icelandic banks were rated as entirely safe. We will learn more.

Anonymous said...

u were very well informed on this glyn. did u have any money with these banks?

Anonymous said...

I hear Powys have £4 million invested

frankie said...

Actually Glyn, the Icelandic banks were in trouble as long ago as last March - so the councils should have had plenty of warning if only someone had their finger on the pulse at the time, and as Anon says responded appropriately.

So looks like another hike in councils taxes for the poor old tax payer.

Gary Price said...

Glyn, It's not just Local councils,what about West Ham United? (I know wrong shape ball)

Sarah Millington said...

I understand that for private investors in Icesave they have to apply to the Icelandic authorities for the first £16,170 pounds they have lost, with the British compensation scheme topping up the rest up to the £50,000 maximum. So are we saying that investors who have more than £50,000 in Icesave are not going to get it all back. This is confusing when the chancellor says that he will ensure all UK savers with accounts with the closed internet bank Icesave will get all of their money back. How can he possibly if the maximum is £50,000.00

Welsh Councils/Public Sector Organisations who have admitted having deposits in Icesave so far are:
Caerphilly - £15m
Ceredigion - £5.5m
Powys - £4m
Gwynedd - £4m
Flintshire - £3.7m
Rhondda Cynon Taf - £3m
Monmouthshire - £1.2m
Gwent Police Authority - £1m

That is to be blunt a hell of a lot of money. If as you say Telford & Wrekin Council withdrew their money, I wonder why others didn't follow suit and yes that includes Powys.

Anonymous said...

It beggars' belief! After following government advice in good faith, local councils across the UK invested their tax payers' money in Icelandic banks that have now collapsed. The Government has now blanched at the thought of rescuing the £1 Billion of lost funds. This same Labour Government managed to find £900 million earlier this year to GIVE to India in foreign aid. India is threatening to overtake us in GDP. India's Tata Motors now owns British icons Land Rover & Jaguar. Why are we funding them!?!? Also, perhaps we should divert some (indeed all) of the £40 million of tax payers money given by our Government to the E.U. EVERY DAY!!!!!!

The Government have agreed to refund 100% of savers in Icesafe, a firm NOT regulated by the FSA, but won't do the same for those in the UK that are FSA regulated. It makes a mockery of their own institutions.

Glyn Davies said...

anon 1 - No, I'm a Barclays man myself.

anon 2 - Indeed it is.

frankie - I hadn't thought there was any grounds for criticism until I heard thaat Telford and Wrekin had withdrawn its money. Clearly there were signals out there. Its a bit soon to know whether this money is going to be repaid eventually or not - but if its not, I'm afraid its likely to be the Council Taxpayer.

Gary - Its seems that almost every public body had money invested there.

Sarah - Agreed.

Roman. - people's exasperation about this is going to be expressed in various ways. I was impressed that you managed to remain so polite!

Anonymous said...

I note that Cllr Millington suggests Powys should have withdrawn the money at an earlier date, as though it were somebody elses problem and somebody else's fault. I may be missing something here but aren't the elected members in place in order to oversee this sort of thing - and therefore is she not just criticising herself and her own?

Anonymous said...

i heard from a good source that telford and wreken coucnil took their money out six months ago because their fund had matured - not because they were being careful or clever. The other councils funds weren't due to mature until next year which is why they hadn't done the same.