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| Council investments 'may vanish' | Council investments 'may vanish' |
| (about 2 hours later) | |
| Councils with millions trapped in failed Icelandic banks might have to write off 90% of their investments, a financial consultant has said. | Councils with millions trapped in failed Icelandic banks might have to write off 90% of their investments, a financial consultant has said. |
| Mark Horsfield, of Arlingclose which advises more than 50 councils, said market forecasts showed they might receive only 0.5p in the pound. | Mark Horsfield, of Arlingclose which advises more than 50 councils, said market forecasts showed they might receive only 0.5p in the pound. |
| One hundred and twenty-three councils have millions of pounds frozen in accounts in Iceland. | One hundred and twenty-three councils have millions of pounds frozen in accounts in Iceland. |
| And even spending watchdog the Audit Commission has cash trapped there. | And even spending watchdog the Audit Commission has cash trapped there. |
| Mr Horsfield, director of Arlingclose, said it was tracking the market in unsecured debt linked to the winding up of companies. | Mr Horsfield, director of Arlingclose, said it was tracking the market in unsecured debt linked to the winding up of companies. |
| Icelandic warning | Icelandic warning |
| "It is trading at the moment somewhere between half a pence in the pound and nine-and-a-half pence in the pound," he told File On 4. | |
| He added that this was a "reasonable indicator" of the likely payout unless "a deal is structured" between governments and the liquidator. | He added that this was a "reasonable indicator" of the likely payout unless "a deal is structured" between governments and the liquidator. |
| Mr Horsfield said the company had been concerned since 2006 about Icelandic banks with their aggressive and persistent touting for business. | Mr Horsfield said the company had been concerned since 2006 about Icelandic banks with their aggressive and persistent touting for business. |
| Find Out More Listen to File On 4, Radio 4 Tuesday 17 March 2009 2000 GMT, repeated Sunday 22 March 1700 GMTOr catch up at Radio 4's Listen Again site | |
| He said the firm was also worried at the time about the Icelandic economy, as the government did not look as if it had the cash to meet any liabilities should a bank collapse. | He said the firm was also worried at the time about the Icelandic economy, as the government did not look as if it had the cash to meet any liabilities should a bank collapse. |
| Arlingclose's council clients were advised not to touch Icelandic banks. the company even used this information when it tendered for new business with councils. | Arlingclose's council clients were advised not to touch Icelandic banks. the company even used this information when it tendered for new business with councils. |
| "It was something we felt passionate about as it had the potential to create problems," he said. | |
| "We didn't have privileged access to information; it was just general market intelligence." | "We didn't have privileged access to information; it was just general market intelligence." |
| Dr Phyllis Starkey MP, who chairs the Commons Select Committee on Communities and Local Government, told the BBC a lot of councils "sleepwalked" into risky investments in Iceland. | Dr Phyllis Starkey MP, who chairs the Commons Select Committee on Communities and Local Government, told the BBC a lot of councils "sleepwalked" into risky investments in Iceland. |
| 'Sleeping watchdog' | 'Sleeping watchdog' |
| "A great many people who should have known better seem to have been asleep at the wheel while this crisis was developing," she said. | "A great many people who should have known better seem to have been asleep at the wheel while this crisis was developing," she said. |
| The committee has been taking evidence about public sector investment and is due to report next month. | The committee has been taking evidence about public sector investment and is due to report next month. |
| Among the public bodies which has lost money in Iceland, is the Audit Commission the official watchdog over public spending, which has loaned £10m to Icelandic banks. | Among the public bodies which has lost money in Iceland, is the Audit Commission the official watchdog over public spending, which has loaned £10m to Icelandic banks. |
| I would hope that the Audit Commission thinks a bit more seriously about why it did not see this area was becoming high risk Dr Phyllis Starkey MP, who chairs the Commons Communities and Local Government select committee | |
| "I can't say exactly what the committee report is going to say," said Dr Starkey but she added: "I think on the basis of the evidence, it will be highly critical of some local authorities, or the Audit Commission and certainly some of the treasury management advisers for local authorities. | "I can't say exactly what the committee report is going to say," said Dr Starkey but she added: "I think on the basis of the evidence, it will be highly critical of some local authorities, or the Audit Commission and certainly some of the treasury management advisers for local authorities. |
| "I would hope that the Audit Commission thinks a bit more seriously about why it did not see this area was becoming high risk." | "I would hope that the Audit Commission thinks a bit more seriously about why it did not see this area was becoming high risk." |
| The Audit Commission told the BBC: "The commission has been entirely transparent about its exposure to the failure of the Icelandic banks. | |
| "It made the facts public on 16 October and commissioned and published a review of the investments, the findings of which were verified by KPMG." | "It made the facts public on 16 October and commissioned and published a review of the investments, the findings of which were verified by KPMG." |
| The commission added: "The findings of the review have been acted upon and we have nothing to add to the detailed reports we have already put in to the public domain." | The commission added: "The findings of the review have been acted upon and we have nothing to add to the detailed reports we have already put in to the public domain." |