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Finance experts sent to councils Finance experts sent to councils
(about 1 hour later)
Financial experts have been sent into three councils which could face short term problems owing to their share of the £858.3m tied up in Icelandic banks. Financial experts have been sent into three councils which could face short-term problems owing to their share of £858.3m in troubled Icelandic banks.
Two district councils, Uttlesford in Essex and Wyre Forest in Worcestershire have been named as two of the three. Two district councils - Uttlesford in Essex and Wyre Forest in Worcestershire - have been named as two of the three.
Ten more are in touch with the government's special "rapid response unit", to help them "assess their position," minister John Healey said.Ten more are in touch with the government's special "rapid response unit", to help them "assess their position," minister John Healey said.
There was "no reason" to think services or wages are at risk, he said.There was "no reason" to think services or wages are at risk, he said.
Two of the three councils, both small district councils, were named on Wednesday evening. The government has set up a "rapid response unit" to deploy finance experts from other local authorities to councils facing "severe short-term difficulties".
Earlier, Mr Healey had said he wanted them to be identified as soon as possible but they had asked for help "in confidence" and it had to be discussed with them first. 'No immediate concern'
Uttlesford confirmed it had £2.2m deposited in Landsbanki - one of the Iceland banks taken into receivership - which amounted to a fifth of its annual budget. A spokesman said he was confident that services would not be affected.Uttlesford confirmed it had £2.2m deposited in Landsbanki - one of the Iceland banks taken into receivership - which amounted to a fifth of its annual budget. A spokesman said he was confident that services would not be affected.
Wyre Forest Council, based in Kidderminster, had £9m deposited in three Icelandic banks but also said there was no immediate concern over services.Wyre Forest Council, based in Kidderminster, had £9m deposited in three Icelandic banks but also said there was no immediate concern over services.
The government met members of the LGA to discuss the issue earlier - 116 authorities, including councils and police authorities in England and Wales, and fire authorities in England had invested money in Icelandic banks.
'Fair deal'
In a joint statement, the two sides said there had been "positive joint working" and the government "continues to work with the Icelandic authorities to ensure a fair deal for all UK depositors".
The government has set up a "rapid response unit" to deploy finance experts from other local authorities to councils facing "severe short term difficulties".
In the Commons earlier, local government minister John Healey was asked to name the councils which had been contacted.
He said he would make the information public "as soon as possible" but the councils had given the information to the LGA "in confidence" and it would have to be "discussed and cleared with those councils first".
Why are these councils investing taxpayers money in an Icelandic bank? Daniel KawczynskiConservative MPWhy are these councils investing taxpayers money in an Icelandic bank? Daniel KawczynskiConservative MP
Shadow local government minister Eric Pickles told him: "There comes to a point where it is better to release than not. I think a number of people who don't understand the nature of local government finance are going to become unduly concerned and worried about cuts in services and reliability. I think it would be better for it to be out in the open." Council leader John Campion said they had not been visited from the team on Wednesday but had been told it would be one of the first three to get one.
For the Lib Dems, Julia Goldsworthy also urged him to name the councils adding: "I think people will be very concerned that initially we were told that no council had done anything reckless and no one would suffer short term problems and now we are being told that some people might." He added: "The council is always receptive to any advice which will help in recovering the £9m investment in the banks affected."
A spokeswoman for the LGA said they were "actively working on how best to release this information". Plymouth City Council, which has £13m invested in three Icelandic banks, has said it faces a £9m shortfall in October.
The government has not offered to guarantee the councils' deposits as it has done for individual British savers. 'Fair deal'
'Maximise return' But it says it has some investments maturing in November which could be used to repay any borrowing. It has not needed help from the finance teams, a spokeswoman said.
But Mr Healey told MPs that councils which found themselves in trouble would not be "left without support": "That's why for the 13 that have reported they may face short term difficulties, we are stepping in immediately." The government met members of the Local Government Association to discuss the issue earlier - 116 authorities, including councils and police authorities in England and Wales, and fire authorities in England had invested money in Icelandic banks.
Reports on the position of the three councils who have called in the financial experts are expected back by the end of the day and experts would continue to work with them, while ten other councils had been contacted by the teams "offering to help them assess their position and other options". In a joint statement, the LGA and ministers said there had been "positive joint working" and the government "continues to work with the Icelandic authorities to ensure a fair deal for all UK depositors".
Several Icelandic banks have failed and will not release depositsSeveral Icelandic banks have failed and will not release deposits
In the Commons earlier, local government minister John Healey had been urged to name the councils which had been contacted.
Shadow local government minister Eric Pickles told him: "I think a number of people who don't understand the nature of local government finance are going to become unduly concerned and worried about cuts in services and reliability. I think it would be better for it to be out in the open."
For the Lib Dems, Julia Goldsworthy added: "I think people will be very concerned that initially we were told that no council had done anything reckless and no-one would suffer short-term problems and now we are being told that some people might."
'Maximise return'
The government has not offered to guarantee the councils' deposits as it has done for individual British savers.
But Mr Healey told MPs that councils which found themselves in trouble would not be "left without support".
"That's why for the 13 that have reported they may face short-term difficulties, we are stepping in immediately."
Conservative MP Daniel Kawczynski asked: "Why are these councils investing taxpayers money in an Icelandic bank?"Conservative MP Daniel Kawczynski asked: "Why are these councils investing taxpayers money in an Icelandic bank?"
SOME COUNCIL INVESTMENTS Kent County Council - £50mNottingham City Council - £42mNorfolk County Council - £32.5mDorset County Council - £28.1m Full list of councils affected
He said his own local councils had not despite being "under the same pressures to maximise return on investments" and suggested councils were not getting enough money from the government.He said his own local councils had not despite being "under the same pressures to maximise return on investments" and suggested councils were not getting enough money from the government.
Mr Healey said it was not true councils had been under pressure to "maximise investments" and had simply been "required to make investments prudently" and to prioritise "security and liquidity".Mr Healey said it was not true councils had been under pressure to "maximise investments" and had simply been "required to make investments prudently" and to prioritise "security and liquidity".
'More optimistic'
Asked how many councils had not yet replied to questions about Icelandic investments, he said the LGA was "pretty confident that they have the full picture" but that might change as the nature of investments became clearer.
The BBC understands a third of the £858.3m invested could be recovered from two of the banks whose UK assets were frozen last week.The BBC understands a third of the £858.3m invested could be recovered from two of the banks whose UK assets were frozen last week.
Speaking after the meeting with ministers LGA chairwoman Margaret Eaton said: "As far as the administrators in this country are concerned, we've been working closely with them and we're more optimistic than we were this time last week. " 'More optimistic'
SOME COUNCIL INVESTMENTS Kent County Council - £50mNottingham City Council - £42mNorfolk County Council - £32.5mDorset County Council - £28.1m class="" href="/1/hi/uk_politics/7660741.stm">Full list of councils affected Speaking after the meeting with ministers, LGA chairwoman Margaret Eaton said: "As far as the administrators in this country are concerned, we've been working closely with them and we're more optimistic than we were this time 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.
Iceland's attractive interest rates had lured many customers from overseas, but last week its biggest banks had to be nationalised.Iceland's attractive interest rates had lured many customers from overseas, but last week its biggest banks had to be nationalised.
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.
Asked about the issue in the Commons later Mr Healey said the government had, in 2004, moved away from a position where it told local councils which institutions they should invest in.