Breaking finance and business news, tax information, jobs and more for finance directors and senior finance professionals.

Protect council cash against Iceland failure

Written by Gary Howes
Thursday, 09 October 2008
Exposure to Icesave and Heritable urges UNISON to call for council protection. Trade union UNISON has called on the government to protect local authorities from losing millions of pounds of council taxpayers' money held in failing Icelandic banks. Related Articles Icesave customers start to get money back Morning business news The Icesave rescue begins Why were they A-rated? Icesave customers will be covered Consumers who invested savings in Icesave and Heritable have already received Government guarantee on their savings. General secretary of UNISON Dave Prentis said: "The government cannot stand by and allow local authorities to lose millions of pounds of council taxpayers' cash. They have stepped in to secure the banking system, and we need the same bold and principled action to protect local councils." The councils with money in Icelandic banks are: Westminster £17 million Havering £12.5 million Brent £15 million Barnet £27 million Sutton £5.5 million Ipswich £2 million West Sussex £12.9 million North Lincolnshire £5.5 million North East Lincolnshire - £2.5 million West Lindsey £7 million Kent £50 million Gateshead £4.5 million Cornwall £5 million Perth and Kinross £1m "Don't bail out the councils" This morning Director of Finance Online's Richard Northedge argued that such action to save consumers, and indeed councils should not be implemented. Writing on his daily blog today he said: If these savers did know anything they would have realised Iceland’s banks had turned to the UK to raise money because they had exhausted the country’s own tiny population. They could have seen that the scale of investment by these banks dwarfed Iceland’s economy. They should have spotted that the country’s compensation scheme is inferior to Britain’s. And if they’d added together those factors they might have guessed that the country could not afford compensation on that scale anyway, and would renege on it, as it has. The local authorities who put their (our) money in these banks have even less excuse. Most were investing in a country with a population smaller than their own council areas. A chancellor who is worried about UK savings going abroad to countries offering more attractive compensation schemes should have used the Icelandic banks’ collapse as a reminder of the danger of investing in the unknown. Instead, by guaranteeing the funds, he has encouraged the outflow to continue, so adding to the problems of UK banks. Problems that the chancellor has to solve.