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Councils meet over Iceland crisis Council 'hopes' over Iceland cash
(40 minutes later)
Local authority officials are meeting ministers to discuss help for 116 English and Welsh councils with money in troubled Icelandic banks. A third of the £858.3m that 116 councils in England and Wales placed in four Icelandic banks could be recovered, the BBC understands.
The Local Government Association says none is in danger of cutting services, but it wants an inquiry into the advice given to councils ahead of the crisis. 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 government has already set up a rapid response unit to help any local authorities in severe difficulty. Administrators say that the value of the assets appears to be of the same order of magnitude as the liabilities.
Councils and other public bodies have about £1bn invested in Icelandic banks. The government has been meeting members of the LGA to discuss the issue.
The country's attractive interest rates had lured many customers from overseas, but last week its biggest banks had to be nationalised. 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.
'First priority' The likelihood of getting back the rest of the money, held directly in Icelandic-based institutions, is less certain.
Funds from councils are now locked up in the banks, along with deposits belonging to individual British savers.
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.
Ernst & Young - administrators of the collapsed UK operations of the Heritable and Kaupthing banks - have said it will be mid-November before they can estimate how much money can be recovered from these businesses. Funds frozen
However, they have suggested the value of assets held by these firms closely matches their liabilities, making councils hopeful of recovering the £300m deposited in these businesses. This issue of repayment and the availability of support for councils most affected by the crisis will also be discussed at Wednesday's meeting, chaired by local government minister John Healey.
But the prospect of getting the rest of the money back, held directly in Icelandic-based institutions, is less certain. "Hopefully we will be able to get cracking on dealing with individual packages for individual councils," a spokesman for the Local Government Association said.
This issue and the availability of support for councils most affected by the crisis is being discussed at Wednesday's meeting, chaired by local government minister John Healey. Funds from councils are now locked up in the banks, along with deposits belonging to individual British savers.
"Hopefully we will be able to get cracking on dealing with individual packages for individual councils," he said. The country's attractive interest rates had lured many customers from overseas, but last week its biggest banks had to be nationalised.
The BBC's Vicky Young said that although few councils are thought to have immediate or acute funding problems, they would be looking to ministers to help them in a variety of ways.The BBC's Vicky Young said that although few councils are thought to have immediate or acute funding problems, they would be looking to ministers to help them in a variety of ways.
On Tuesday, Communities Secretary Hazel Blears defended the government's investment advice to councils, saying it had been "prudent and sensible".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, the 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 taxpayers, communities and those public services on which the most vulnerable people in our society depend," Ms Blears said. SOME COUNCIL INVESTMENTS Kent County Council - £50mNottingham City Council - £42mNorfolk County Council - £32.5mDorset County Council - £28.1m Full list of councils affected "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. SOME COUNCIL INVESTMENTS Kent County Council - £50mNottingham City Council - £42mNorfolk County Council - £32.5mDorset County Council - £28.1m Full list of councils affected
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.