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Councils seeking Darling meeting Councils seeking Darling meeting
(40 minutes later)
Local authority leaders are seeking an urgent meeting with the chancellor after it emerged at least 20 councils have cash in troubled Icelandic banks.Local authority leaders are seeking an urgent meeting with the chancellor after it emerged at least 20 councils have cash in troubled Icelandic banks.
Their overall investment is hundreds of millions of pounds and they are asking the UK government for the protection it has promised to personal savers.Their overall investment is hundreds of millions of pounds and they are asking the UK government for the protection it has promised to personal savers.
Iceland Prime Minister Geir Haarde said his government is working to repair relations with Britain amid the crisis. The Conservatives have warned that up to £1bn in council funding could potentially be in danger.
The Local Government Association said services would in no way be at risk. But the Local Government Association (LGA) said services were not at risk.
The Treasury said it was looking into the issue of protection for councils. The Treasury said it was looking into the issue of protection for councils but has, so far, given no guarantees over the money.
Council investmentsCouncil investments
Gordon Brown announced legal action would be taken over Iceland's failure to guarantee compensation for UK customers in its banks. The LGA, which represents councils in England and Wales, says it has identified more than 20 councils which are believed to have deposits in the collapsed Icelandic bank Landbanksi or its UK arm Heritable.
The Local Government Association (LGA) represents councils in England and Wales.
It says it has identified more than 20 councils which are believed to have deposits in Landbanksi or Heritable, the firm's UK bank.
They include Kent County Council, which has £50m invested with Iceland-based banks.They include Kent County Council, which has £50m invested with Iceland-based banks.
The LGA is still trying to work out the total sums involved but believes that, Kent aside, many of the councils had investments in the "single figure millions of pounds" but others had deposits "running into the low tens of millions".The LGA is still trying to work out the total sums involved but believes that, Kent aside, many of the councils had investments in the "single figure millions of pounds" but others had deposits "running into the low tens of millions".
ICELANDIC INVESTMENTS Kent County Council, £50mWestminster City Council, £17mHertfordshire County Council, £17mHavering Council, £12.5m Buckinghamshire County Council, £5mICELANDIC INVESTMENTS Kent County Council, £50mWestminster City Council, £17mHertfordshire County Council, £17mHavering Council, £12.5m Buckinghamshire County Council, £5m
A small number of the councils involved have already been identified. Westminster City Council has revealed it had deposits totalling £17m. The LGA's deputy chief executive John Ransford disputed the Conservative claims of the amount of money at risk.
Sutton Council in south London confirmed it had exposure totalling £5.5m, and Havering Council in east London said it had investments worth £12.5m. But he said that "significant" amounts of public money were at stake which must be protected.
North Lincolnshire Council has £2m invested with Landsbanki and £3.5m in Heritable. North East Lincolnshire Council said it had £2.5m on deposit with Landsbanki. "This is public money and we need to treat this in exactly the same way as individual investments in these banks," he told the BBC.
Hertfordshire County Council has £17m invested, while Buckinghamshire has £5m - the same sum as Cornwall County Council. Westminster City Council has revealed it had deposits totalling £17m while Sutton and Havering Councils in London have investments worth £5.5m and £12.5m respectively.
North Lincolnshire Council has £2m deposited with Landsbanki and £3.5m in Heritable. North East Lincolnshire Council said it had £2.5m on deposit with Landsbanki.
Hertfordshire County Council has £17m invested, while Buckinghamshire has £5m, as has Cornwall County Council.
Boris Johnson, the Mayor of London, has also revealed that Transport for London had £40m deposited in one of the affected banks.
"We are looking to see what redress we can find," he said.
'Massive shock'
The Conservatives have warned that town halls could face a "massive financial shock" and be forced into council tax hikes or cuts in local services.The Conservatives have warned that town halls could face a "massive financial shock" and be forced into council tax hikes or cuts in local services.
"They are not going to find it easy in the short term," Eric Pickles, the party's shadow communities secretary, said.
He added: "We need to look at the number of authorities that will be facing a cash-flow problem - some have their payroll on this, for others it's in terms of long-term investment."
We will fight to get every single penny back Nick Chard, Kent County Council
The LGA insisted that all the councils involved had enough money to ensure that frontline services should not be affected.The LGA insisted that all the councils involved had enough money to ensure that frontline services should not be affected.
The government is now going to have to decide how hard a hard ball it's going to play John Andrew, BBC But it wants the same protection for councils as has been given to personal customers of Icesave and other failed Icelandic banks.
The LGA says there is no question of services being at risk, but it wants the same protection for councils as has been given to personal customers of Icesave and other failed Icelandic banks. Nick Chard, cabinet member for finance on Kent County Council, said the local authority would "fight to get every single penny back".
The Treasury said councils fall into a different category to savers, but that the government was aware of the concerns and was looking at the issue. He defended the local authority's decision to invest in Icelandic banks despite concerns about their indebtedness, saying its investments were made on the basis on sound professional advice.
BBC local government correspondent John Andrew said there was growing anger among councils, who say they followed Treasury advice by investing surplus money in a way that would deliver the highest return for taxpayers. "We have followed the protocols exactly to the letter," he told the BBC, adding that it had spread its investments as widely as possible.
Anger
Local government correspondent John Andrew said there was growing anger among councils, which say they followed Treasury advice by investing surplus money in a way that would deliver the highest return for taxpayers.
He said the councils had been told by the government that the Icelandic banks had been given a "double A" rating.He said the councils had been told by the government that the Icelandic banks had been given a "double A" rating.
Payroll threat
"The government is now going to have to decide how hard a hard ball it's going to play with them," he said."The government is now going to have to decide how hard a hard ball it's going to play with them," he said.
One option, our correspondent added, was to follow the example set during an earlier investment crisis suffered by councils and offer not a total bail-out but a softening of the blow through measures such as reductions business rates payments.One option, our correspondent added, was to follow the example set during an earlier investment crisis suffered by councils and offer not a total bail-out but a softening of the blow through measures such as reductions business rates payments.
Shadow communities secretary Eric Pickle said the government has two priorities towards local councils. Gordon Brown has said legal action will be taken over Iceland's failure to guarantee compensation for UK customers in its banks.
He told the BBC's Today programme: "It needs to get a thoroughly comprehensive idea as to what the size of the problem is. Iceland Prime Minister Geir Haarde said his government was working to repair relations with Britain amid the crisis.
"Then we need to look at the number of authorities that will be facing a cash-flow problem - some have their payroll on this, for others it's in terms of long-term investment."
Mr Haarde was unable to say what protection Iceland could offer for the bank's customers in the UK, but said his ministers had made contact with their British counterparts in an effort to avoid legal action.
He also said his government had been taken by surprise by the crisis in its banks and by Britain's decision to bring legal action over Icesave.