Page last updated at 16:16 GMT, Friday, 10 October 2008 17:16 UK

Cash crisis 'won't hit services'

Millions of pounds of Welsh councils' money is in frozen Icelandic bank accounts

Ministers have offered a reassurance that Welsh council services and tax levels are unlikely to be hit "at this stage" by the Icelandic banking crisis.

Nine Welsh local authorities are worried about 60m they have in Icelandic banks or their subsidiaries.

But the assembly government said those sums had to be viewed in proportion to councils' much larger overall budgets.

Ministers in Cardiff also say they are fully supporting UK Treasury attempts to get the money back.

The assembly government's statement came after Welsh Secretary Paul Murphy confirmed that the responsibility for helping councils in Wales lies with ministers in Cardiff.

The situation looks very unlikely to impact upon the provision of local authority services or have council tax implications at this stage
Joint statement by Brian Gibbons and Andrew Davies, Welsh Assembly Government ministers
Mr Murphy said since local government is devolved, it will be for the assembly government to help, but the Treasury will also have a role to play.

Local Government Minister Brian Gibbons and Finance Minister Andrew Davies said they were "fully supporting" the UK administration's efforts to get Iceland to release the assets of councils and police authorities in England and Wales and persuade them to meet any losses.

First Minister Rhodri Morgan has also written to Chancellor Alistair Darling voicing Welsh councils' concerns.

Cardiff ministers have discussed the crisis at the Welsh Local Government Association (WLGA) meeting in Llandudno, and assembly government officials are monitoring the position with the councils affected.

Location map

Neath Port Talbot - 20m; 2007/8 gross revenue expenditure budget: 430m; potential loss: 4.6%
Caerphilly - 15m; budget: 365m; potential loss: 4%
Ceredigion - 5.5m; budget: 147m; potential loss: 3.6%
Powys - 4m; budget: 262m; potential loss: 1.5%
Gwynedd - 4m; budget: 242m; potential loss: 1.6%
Carmarthenshire - 4m; budget: 350m; potential loss: 1%
Flintshire - 3.7m; budget: 274m; potential loss: 1.35%
Rhondda Cynon Taf - 3m; budget: 491m; potential loss: 0.6%
Monmouthshire - 1.2m; budget: 154m; potential loss: 0.6%
Gwent Police Authority - 1m
South Wales Police Authority - 7m
Dyfed-Powys Police Authority - 2m
Source: BBC Wales' Dragon's Eye
But Dr Gibbons and Mr Davies said in a joint statement: "In discussions with local authorities it is clear that whilst the sums are large they have to be considered in the context of the overall amounts of cash available to local authorities; the situation looks very unlikely to impact upon the provision of local authority services or have council tax implications at this stage."

The assembly government had earlier been accused by Welsh Liberal Democrat leader Mike German of "sleepwalking into a crisis," and Conservative Shadow Welsh Secretary Cheryl Gillan said councils "needed certainty".

A total of more than 70m of public money from Welsh councils and three police authorities is tied up in Icelandic banks now in receivership.

The councils include Neath Port Talbot, which has the most invested, at 20m, and Cerphilly, with 15m.

It has now emerged that Carmarthenshire is the latest council affected, with 4m in an Icelandic bank.

The others are Ceredigion, Powys, Gwynedd, Flintshire, Rhondda Cynon Taf, Monmouthshire, Gwent Police Authority, South Wales Police Authority, and Dyfed-Powys Police Authority.

Mr Murphy also stressed that people should not worry about cuts in services in sudden increases in council tax.

He said: "That's not going to happen. Because although these [monies] when, added up, is a large sum, individually, when compared to the huge sums that local authorities spend, they're not in the category of seeing services reduced."

Until now, the assembly government had suggested financial help for Welsh councils would come from the Treasury, as the Local Government Association was negotiating with them on behalf of Welsh, as well as English councils.

'Stark choices'

Any help for the three Welsh police authorities with money in Iceland will come from the Treasury, because policing is not a devolved matter.

Mr German, who held the economic portfolio when the Lib Dems shared power with Labour in the assembly until 2003, said current assembly ministers had not "given the response I would expect from a responsible government".

"The choices are quite stark for us and the credit crunch has now hit the Welsh Assembly Government and at the moment their silence is deafening in what they are going to do in response."

Mrs Gillan has written to Mr Murphy offering to help to find solutions to the crisis affecting councils.

In a letter she said: "The Treasury has announced that they will arrange full compensation for individuals affected by this collapse but the situation remains uncertain over depositors such as our Welsh councils.

"As a result local government finances are at risk and people will be concerned about their local services and council tax bills. We need to clear up this uncertainty."

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