Government stick up for councils over Iceland cash

Following the collapse of Icelandic banks earlier this month it was revealed that over one hundred councils across the country had lost millions of pounds, which they had invested in the Icelandic banks, which then went bust. There was outrage amongst consumers, who wanted to know why the council had been putting money into these banks, and the government was unable to provide any guarantee that the councils would receive back their money.

The government has since said that whilst it had offered a 100% guarantee on savings for the general public who had put their cash into these banks, it was unable to give any cast iron guarantees to councils and charities. It said that cases would be looked at on an individual basis with a view to trying to help as much as possible after the Icelandic government failed to honour compensation scheme guarantees for UK consumers and businesses.

The government has now said that it does not believe that councils were reckless by putting their money in these banks, and government officials stated: “Government and the LGA agreed that there is no evidence of recklessness by local authorities. We will judge what’s appropriate on a case-by-case basis but, in previous situations, support has included helping local authorities restructure their financial priorities, providing additional expertise and capitalisation of expenditure.”

James Purnell, the Minister for Work and Pensions, said: “We met with the Local Government Association and have been discussing this with councils, and we’ve agreed that we want to work together obviously to protect service levels - but this is a complicated situation. We’ve agreed that we will work with them over the next few days, and that is the right way of doing it, making sure we get a proper answer.”