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Councils 'not reckless with cash' Councils seeking Darling meeting
(about 13 hours earlier)
Local authorities have not been "reckless" in investing more than £720m with failed Icelandic banks, the government has said. Local authority leaders are seeking an urgent meeting with the chancellor after it emerged at least 20 councils have cash in troubled Icelandic banks.
Deposits from almost 100 councils could be at risk, the BBC has learned. Their total investment amounts to hundreds of millions of pounds and they are asking the government for the same protection promised to personal savers.
Ministers have met council leaders and are promising "appropriate" help on a "case-by-case basis". Iceland Prime Minister Geir Haarde said his government is working to repair relations with Britain amid the crisis.
Gordon Brown said he was considering "further action", but the government is not offering to guarantee authorities' deposits with Icelandic banks. The Treasury said it was looking into the issue of protection for councils.
BBC News has so far learned that local authorities across England, Wales and Scotland hold deposits worth £724.8m in total. Gordon Brown announced legal action would be taken over Iceland's failure to guarantee compensation for UK customers in its banks.
The figure reaches £860.5m when investments by 15 police authorities and Transport for London are added. The Local Government Association (LGA), which represents councils in England and Wales, 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.
The Conservatives said the total could reach £1bn once all investments are known. The Liberal Democrats said a third of councils may be affected.
Council investmentsCouncil investments
The government said it wanted to "establish the facts" about financial exposure and was prepared to have discussions about a "way forward". 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".
SOME CONFIRMED DEPOSITS Kent County Council, £50mNottingham City Council, £42m Transport for London, £40mNorfolk County Council, £32.5mDorset County Council, Hertfordshire County Council, £28mBarnet Council, £27mSomerset County Council, £25mHillingdon Council, £20mWestminster City Council, £17mHertfordshire County Council, £17mBrent Council, £15mHavering Council, £12.5mCheltenham Council, £11mNorth Lincolnshire Council: Sutton Council, £5.5m Buckinghamshire County Council: Cornwall County Council, £5m class="" href="/1/hi/uk_politics/7660800.stm">Q&A: Council funds at risk class="" href="/1/hi/wales/7660300.stm">Welsh councils concerned class="" href="/1/hi/scotland/north_east/7661206.stm">Scottish impact class="" href="/1/hi/uk/7660741.stm">Full list of councils affected class="" href="/1/hi/england/7660684.stm">Impact on North of England councils class="" href="ID=">Kent vow over £50m investment class="" href="/1/hi/england/somerset/7661123.stm">Worries in Somerset over deposits A small number of the councils involved have already been identified. Westminster City Council has revealed it had deposits totalling £17m.
Treasury Ministers Stephen Timms and Ian Pearson and Local Government Minister John Healy held talks with the Local Government Association. 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.
In a joint statement afterwards they said: "Government and the LGA agreed that there is no evidence of recklessness by local authorities." 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.
They added: "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." Hertfordshire County Council has £17m invested, while Buckinghamshire has £5m - the same sum as Cornwall County Council.
The government has frozen the assets held in the UK by the Icelandic bank Landsbanki. Despite the Conservatives warning that town halls could face a "massive financial shock" and be forced into council tax hikes or cuts in local services, the LGA insisted that all the councils involved had enough money to ensure that frontline services should not be affected.
BBC local government correspondent John Andrew said there was growing anger among local authorities, which said they had followed Treasury advice by investing surplus money in a way that would deliver the highest return for taxpayers. 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.
He said the councils had been told by the government that the Icelandic banks had been given a "double A" rating. 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.
According to figures acquired so far for local authorities, Kent County Council has the largest deposit, worth £50m. The Treasury said councils fall into a different category, but that the government was aware of the concerns and was looking at the issue.
Nottingham City Council has invested £42m, while Transport for London has £40m deposited in one of the affected banks. Mr Haarde was unable to say what protection his country 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.
The next biggest known investments are Norfolk County Council's £32.5m, £30m by the Metropolitan Police, Dorset County Council's £28.1m and Hertfordshire County Council's £28m. 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.
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.
Payrolls
"They are not going to find it easy in the short term," shadow communities secretary Eric Pickles 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."
The Lib Dems said the money at stake was "essential" for delivering local services and urged ministers to "make clear" how such funding would be protected.
Local government minister John Healey: 'This isn't money that's lost'
The LGA insisted all the councils involved had enough money to ensure frontline services should not be affected.
But it wants the same protection for councils as has been given to personal customers of IceSave and other failed Icelandic banks.
The prime minister said: "We are freezing the assets of Icelandic companies in the United Kingdom where we can.
"We will take further action against the Icelandic authorities wherever that is necessary to recover the money. At the moment we are talking with the local authorities... to see what we can do to help."
Icelandic Prime Minister Geir Haarde said his government was working to repair relations with Britain amid the crisis.

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