Page last updated at 15:42 GMT, Friday, 17 October 2008 16:42 UK

Iceland banks owe councils 920m

People outside Icelandic bank Landsbankinn
The councils want their money back from the Icelandic banks

The amount of taxpayers' money tied up in failed Icelandic banks is edging closer to the 1bn mark.

Latest figures from the Local Government Association show 123 councils have deposited money in Icelandic accounts totalling 920m.

The government said it was working to get the money back and would offer expert help to any council in trouble.

It follows criticism of the "emergency teams" sent to three councils allegedly hit by cash flow problems.

Robert Pritchard, a senior member of one of the three councils identified on Wednesday as facing problems, said the troubleshooters seemed "more interested in defending the government line than getting the money back".

"They were not from the government at all, they were from the LGA. Nobody from the government turned up," the cabinet member for finance said.

'Comedy of errors'

"The only help our council and other councils need is for the government to help us get our money back. They have the power and resources to do that, so why don't they get on and do it?", said Mr Pritchard.

He said Tamworth did not have any cash flow problems and the government had only sent "troubleshooters" to it and the other two councils because they were Conservative controlled authorities in "marginal seats".

We will review the financial position of all affected councils in light of these fast moving circumstances
Department for Communities and Local Government

This was denied by the Department for Communities and Local Government (DCLG), which said they were financial experts sent in at the councils' own request.

The other two councils named - Uttlesford in Essex and Wyre Forest in Worcestershire - have also stressed that they do not have any immediate concerns over maintaining services.

Shadow Local Government Secretary Eric Pickles, for the Conservatives, said: "Labour might have been better off buying the three councils a linguaphone tape in conversational Icelandic for all the help they've offered up.

"(Local government minister) John Healey has cynically used these three authorities as a political football trying to divert attention away from the government's mismanagement of this crisis.

"Day by day this saga has unravelled into a comedy of errors."


According to the latest LGA figures, the councils with the largest deposits in Iceland include Kent with 50m, Hertfordshire with 28m, Somerset with 25m and Surrey with 20m.

But a spokeswoman for the Communities and Local Government Department said many councils who had initially said they were facing financial difficulties had told the LGA "this is not now the case".

"It would be inappropriate to worry residents unduly by naming councils that do not believe they are now in immediate difficulty," she said.

"We will review the financial position of all affected councils in light of these fast moving circumstances.

"Where reviews suggest that a council does face potentially serious short term financial difficulties we will offer financial expertise to support them."

She said financial experts were working with the three councils named on Wednesday and denied the claims made by Mr Pritchard that ministers were not doing enough to get the money back.

'Expert teams'

"The government has taken decisive action to help councils, and other creditors, get their money back.

"The three councils were identified following self-notification by the councils themselves and following discussion with the LGA.

"It is not correct to say that they were just picked out by government.

"The help being provided is in the form of expertise in local authority finance which is being largely supplied by peers in local government itself.

"So it is unsurprising that these teams do not include Whitehall officials.

"We are delighted that Tamworth Council say that they are not in financial difficulty."

Audit chiefs have 10m in Iceland
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Finance experts sent to councils
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In full: Councils facing losses
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Councils 'not reckless with cash'
10 Oct 08 |  UK Politics
Q&A: Council funding at risk
16 Oct 08 |  UK Politics

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