Councils rapped over Iceland cash
Author: BBC |
An all-party group of MPs has criticised councils for not spotting warning signs that Icelandic banks were heading for collapse last October.
When Landsbanki and other banks went under they took nearly £1bn of investments from over 100 authorities.
The Communities and Local Government Select Committee says complacency, lack of expertise and inaction all helped put taxpayers’ money at risk.
But a group representing councils said that they had received poor advice.
Since 2004, councils have been able to regulate their own borrowing and investment. Rules state they can only put money in institutions with high credit ratings, they must invest in sterling and it must mature within a year.
Councils were warned in late September 2008 of changes in credit ratings for Icelandic banks, before the country’s financial sector collapsed the following month, but some still invested after September.
The government welcomed the report and stressed that no council has cut services or raised council tax because of the investments.
“It is right that councils continue to make responsible investments of taxpayers’ money,” a spokesperson for Communities and Local Government said.
“But the report also makes clear councils need further support in making investment decisions.”