Council blasted over Iceland cash

A Hampshire council which invested £1m in a troubled Icelandic bank a month ago has been branded "blind and deaf".

Winchester City Council defended its decision to deposit the cash with Heritable, a subsidiary of the troubled Landsbanki, on 16 September.

It said independent advice showed the bank had a high "Fitch (F1) credit rating - the highest credit quality".

It said the advice did not change until 30 September but Lib Dem peer Lord Oakeshott said there were warnings.

"I cannot imagine what they were doing"
Lib Dem peer Lord Oakeshott

A city council spokesman said: "The investment was made through a broker in accordance with the council's treasury management strategy which fully complies with the Department of Communities and Local Government's guidance.

"The council operates a policy to spread its risk over a number of investments and currently has £32m invested, with no more than £3m in any one institution."

Lord Oakeshott and Tory MP Michael Fallon both reportedly raised concerns with ministers on separate occasions following warnings in July about Icelandic banks facing collapse.

He said: "Councils are also responsible for the prudent management of their money and particularly councils who have put money in Iceland banks last week, like Winchester who put £1m in a subsidiary of Landsbanki only a month ago.

"They must have been blind and deaf.

"There were very serious warnings, there was very serious downgradings.

"I cannot imagine what they were doing."

Frontline services

The city council said it was backing the Local Government Association's (LGA) call for the chancellor to protect council deposits.

UK councils and other public bodies have about £1bn invested and it is not known if their deposits are safe.

Icelandic and UK authorities are trying to establish a single claims procedure.

A Treasury delegation spent the weekend in talks with their Icelandic counterparts.

Private customers with Landsbanki's closed internet bank Icesave are protected by the UK's Financial Services Compensation Scheme.

And arrangements have been agreed "in principle" for a quick payout to retail depositors in Icesave.

But the Icelandic government has not extended protection to the £1bn of taxpayers' money invested by councils, police forces, fire services and charities.

So far, more than 100 local authorities in England, Wales and Scotland have revealed they have deposits valued at £842.5m in total.

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