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Council 'hopes' over Iceland cash Finance experts sent to councils
(30 minutes later)
A third of the £858.3m that 116 councils in England and Wales placed in four Icelandic banks could be recovered, the BBC understands. Financial experts have been sent into three councils facing severe short term problems owing to money their share of the £858.3m tied up in Icelandic banks.
The Local Government Association is hopeful that up to £300m could be recouped from two of the banks whose UK assets were frozen last week. The Local Government Association has asked for quick reports back on how badly the councils are affected.
Meanwhile financial experts have been sent into three unnamed councils which face severe short-term problems. Local Government Minister John Healey said the unnamed councils were among 13 which were having problems.
The LGA is hopeful £300m of English and Welsh councils' will be recovered from two Icelandic banks' frozen UK assets.
The government has been meeting members of the LGA to discuss the issue.The government has been meeting members of the LGA to discuss the issue.
Severe problems Collapsed banks
Local government minister John Healey confirmed to the BBC that finance experts had been sent in to three councils facing severe problems because of money tied up in the banks. The government announced on Tuesday it had set up a "rapid response unit" to deploy finance experts to councils facing "severe short term difficulties" in the aftermath of the Icelandic banks crisis. Earlier Mr Healey confirmed experts had been sent to three councils.
The LGA will ask for reports back by the end of Wednesday on how badly they were affected. The three councils have not been named but Mr Healey said they were among 13 experiencing problems. The BBC understands that a third of the money invested by 116 councils in England and Wales in four Icelandic banks could be recovered from two of the banks whose UK assets were frozen last week.
It will be mid-November before administrators Ernst & Young can estimate accurately how much money can be recovered from the collapsed UK operations of the Heritable and Kaupthing banks.It will be mid-November before administrators Ernst & Young can estimate accurately how much money can be recovered from the collapsed UK operations of the Heritable and Kaupthing banks.
The likelihood of getting back the other two thirds of the money, held directly in Icelandic-based institutions, is less certain.The likelihood of getting back the other two thirds of the money, held directly in Icelandic-based institutions, is less certain.
The UK Treasury has said it is working with the Icelandic government to ensure all depositors get their money back as soon as possible.The UK Treasury has said it is working with the Icelandic government to ensure all depositors get their money back as soon as possible.
It has offered Landsbanki - one of banks nationalised by the Icelandic government - a £100m loan to help it repay some of its UK creditors.It has offered Landsbanki - one of banks nationalised by the Icelandic government - a £100m loan to help it repay some of its UK creditors.
This issue of repayment and the availability of support for councils most affected by the crisis was also being discussed at Wednesday's meeting, chaired by local government minister John Healey.This issue of repayment and the availability of support for councils most affected by the crisis was also being discussed at Wednesday's meeting, chaired by local government minister John Healey.
'Sensible' advice'Sensible' advice
"Hopefully we will be able to get cracking on dealing with individual packages for individual councils," a spokesman for the Local Government Association said."Hopefully we will be able to get cracking on dealing with individual packages for individual councils," a spokesman for the Local Government Association said.
Funds from councils are now locked up in the banks, along with deposits belonging to individual British savers.Funds from councils are now locked up in the banks, along with deposits belonging to individual British savers.
The country's attractive interest rates had lured many customers from overseas, but last week its biggest banks had to be nationalised. SOME COUNCIL INVESTMENTS Kent County Council - £50mNottingham City Council - £42mNorfolk County Council - £32.5mDorset County Council - £28.1m Full list of councils affected On Tuesday, Communities Secretary Hazel Blears defended the government's investment advice to councils, saying it had been "prudent and sensible".The country's attractive interest rates had lured many customers from overseas, but last week its biggest banks had to be nationalised. SOME COUNCIL INVESTMENTS Kent County Council - £50mNottingham City Council - £42mNorfolk County Council - £32.5mDorset County Council - £28.1m Full list of councils affected On Tuesday, Communities Secretary Hazel Blears defended the government's investment advice to councils, saying it had been "prudent and sensible".
She insisted that getting depositors money back was the government's "first priority" and in the meantime, a rapid response unit would help any councils in trouble.She insisted that getting depositors money back was the government's "first priority" and in the meantime, a rapid response unit would help any councils in trouble.
"We are taking this action to protect council tax payers, communities and those public services on which the most vulnerable people in our society depend," Ms Blears said."We are taking this action to protect council tax payers, communities and those public services on which the most vulnerable people in our society depend," Ms Blears said.
Shadow communities secretary Eric Pickles said the government must give more details of which bodies had been affected by the crisis - and how seriously.Shadow communities secretary Eric Pickles said the government must give more details of which bodies had been affected by the crisis - and how seriously.
He said "there is no detailed survey of this exposure".He said "there is no detailed survey of this exposure".
"Local taxpayers have a right to know the threat to their council tax bills and local services.""Local taxpayers have a right to know the threat to their council tax bills and local services."
The LGA is demanding an inquiry into why credit rating agencies continued to rate Icelandic banks relatively highly just days before they collapsed.The LGA is demanding an inquiry into why credit rating agencies continued to rate Icelandic banks relatively highly just days before they collapsed.
Cllr Margaret Eaton, chairwoman of the LGA, said: "No council should rely solely on credit agencies and must use their financial nous.Cllr Margaret Eaton, chairwoman of the LGA, said: "No council should rely solely on credit agencies and must use their financial nous.
"But there must be confidence in credit ratings as councils continue to invest billions of pounds in a whole range of financial institutions.""But there must be confidence in credit ratings as councils continue to invest billions of pounds in a whole range of financial institutions."
Mr Pickles said the government had not updated its guidance for local authorities since 2004.Mr Pickles said the government had not updated its guidance for local authorities since 2004.
"There is a difference between light-touch regulation and neglect," he said."There is a difference between light-touch regulation and neglect," he said.