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.