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| Audit chiefs have £10m in Iceland | Audit chiefs have £10m in Iceland |
| (about 1 hour later) | |
| The watchdog conducting an inquiry into local authorities' decisions to invest in Icelandic banks has admitted it has also got £10m tied up in the country. | |
| The Audit Commission's job is to ensure that £180bn of public sector spending provides "value for taxpayers". | |
| It said it deposited £5m in Landsbanki in April this year - and a further £5m in July in Iceland's Heritable Bank. | It said it deposited £5m in Landsbanki in April this year - and a further £5m in July in Iceland's Heritable Bank. |
| The commission said the deposits were in "full compliance" with their guidelines "on prudent investment". | The commission said the deposits were in "full compliance" with their guidelines "on prudent investment". |
| Embarrassment | |
| The admission is embarrassing for the body established to ensure greater efficiency and value for money in the delivery of public services. | The admission is embarrassing for the body established to ensure greater efficiency and value for money in the delivery of public services. |
| Despite concerns at the time of its last investment about the strength of Iceland's banking sector, the commission insisted it only banked with "top rated institutions". | |
| "Given the size of the financial calamity that has happened in the global economy, spreading your assets over 11 different institutions, it's quite probable that you are going to get hit on at least one of them," said the commission's chairman Michael O'Higgins. | "Given the size of the financial calamity that has happened in the global economy, spreading your assets over 11 different institutions, it's quite probable that you are going to get hit on at least one of them," said the commission's chairman Michael O'Higgins. |
| We only invested in the top rated institutions Michael O'Higgins, Audit Commission chairman | |
| Asked whether it would be difficult to give a judgement on the prudence of councils who invested money, given that it had also invested in the banks, he said: "I can see that it looks awkward but the question is: Were the policies prudent and were the policies followed? And those are two questions we can examine." | |
| It has also emerged that Oxford University has £30m worth of funds in Icelandic institutions. | It has also emerged that Oxford University has £30m worth of funds in Icelandic institutions. |
| Money from individual colleges pooled into a central fund was invested in three banks. | Money from individual colleges pooled into a central fund was invested in three banks. |
| The university authorities said no deposits were made in the last 18 months and stressed that it has sufficient cash reserves to cover the requirements of colleges. | The university authorities said no deposits were made in the last 18 months and stressed that it has sufficient cash reserves to cover the requirements of colleges. |
| Questions raised | |
| The Audit Commission said that it did not expect the investments - which account for about 4% of its annual turnover - would affect its future operations or staffing. | The Audit Commission said that it did not expect the investments - which account for about 4% of its annual turnover - would affect its future operations or staffing. |
| However, it has launched an internal review into how the deposit decision was taken and says it expects the National Audit Office, which audits its finances, to hold a separate inquiry. | However, it has launched an internal review into how the deposit decision was taken and says it expects the National Audit Office, which audits its finances, to hold a separate inquiry. |
| The commission said when it invested the money the two banks had strong credit ratings and as a public body it was "obliged to maximise returns on its working reserves". | |
| Council leaders have met ministers to discuss help for the worst affected authorities | |
| Questions about the position of the Icelandic banking sector were already being aired in Parliament, as well as in the City, in July. | Questions about the position of the Icelandic banking sector were already being aired in Parliament, as well as in the City, in July. |
| Local authorities across England and Wales invested £858m in Icelandic banks, money which is now at risk after the turmoil in the country's economy and the banks' nationalisation. | Local authorities across England and Wales invested £858m in Icelandic banks, money which is now at risk after the turmoil in the country's economy and the banks' nationalisation. |
| It emerged on Wednesday that three councils with money in Icelandic banks potentially face "severe" short-term financial problems. | It emerged on Wednesday that three councils with money in Icelandic banks potentially face "severe" short-term financial problems. |
| Two of those named - Uttlesford in Essex and Wyre Forest in Worcestershire - have stressed that they do not have any immediate concerns over maintaining services. | Two of those named - Uttlesford in Essex and Wyre Forest in Worcestershire - have stressed that they do not have any immediate concerns over maintaining services. |
| Ministers have sent a team of financial troubleshooters to the councils to assess their position and what assistance they may require. | Ministers have sent a team of financial troubleshooters to the councils to assess their position and what assistance they may require. |
| Talks between ministers and local authority leaders over help for ten further councils with possible difficulties will continue on Thursday. | Talks between ministers and local authority leaders over help for ten further councils with possible difficulties will continue on Thursday. |
| The government has pledged to do all it can to help recover public money in Icelandic banks although it has declined to offer a blanket guarantee similar to that for individual deposits. | The government has pledged to do all it can to help recover public money in Icelandic banks although it has declined to offer a blanket guarantee similar to that for individual deposits. |
| The row between the UK and Icelandic governments over the banking crisis show no sign of dying down despite a trip by UK officials to Iceland last weekend to try and defuse the situation. | The row between the UK and Icelandic governments over the banking crisis show no sign of dying down despite a trip by UK officials to Iceland last weekend to try and defuse the situation. |
| Reykjavik has hired a British law firm to examine a possible lawsuit against the UK after the Treasury froze the UK assets of Landsbanki, one of the nationalised banks. | Reykjavik has hired a British law firm to examine a possible lawsuit against the UK after the Treasury froze the UK assets of Landsbanki, one of the nationalised banks. |
| Iceland's prime minister accused the UK government of using counter-terrorism laws to freeze the assets and has since complained to Nato about the UK's actions. | |
| Gordon Brown last week described Iceland's unwillingness to fully guarantee UK deposits in Icesave, a branch of Landsbanki, as "unacceptable" and "illegal". | Gordon Brown last week described Iceland's unwillingness to fully guarantee UK deposits in Icesave, a branch of Landsbanki, as "unacceptable" and "illegal". |