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| Councils 'ignored Iceland risks' | Councils 'ignored Iceland risks' |
| (30 minutes later) | |
| Seven English councils have been accused of "negligence" for putting money into Icelandic banks days before they went bust last October. | Seven English councils have been accused of "negligence" for putting money into Icelandic banks days before they went bust last October. |
| The authorities paid nearly £33m into the banks just before they collapsed despite warnings about their solvency. | The authorities paid nearly £33m into the banks just before they collapsed despite warnings about their solvency. |
| Spending watchdog The Audit Commission, which itself deposited £10m in the banks, said lessons had to be learnt. | Spending watchdog The Audit Commission, which itself deposited £10m in the banks, said lessons had to be learnt. |
| Councils have rejected the criticism, one saying that it was a case of "the kettle calling the pot black". | Councils have rejected the criticism, one saying that it was a case of "the kettle calling the pot black". |
| The fate of the £954m deposited by more than 100 councils and other public bodies in Icelandic banks remains uncertain. | The fate of the £954m deposited by more than 100 councils and other public bodies in Icelandic banks remains uncertain. |
| 'Mistakes' | 'Mistakes' |
| These investments do not have the same protection as individual deposits in Icelandic banks, guaranteed by British ministers after the meltdown of Iceland's banking system. | These investments do not have the same protection as individual deposits in Icelandic banks, guaranteed by British ministers after the meltdown of Iceland's banking system. |
| Although the overall amount of money at risk accounts for just 3% of councils' total cash reserves, 18 authorities have more tied up in Icelandic banks than in their own reserves. | Although the overall amount of money at risk accounts for just 3% of councils' total cash reserves, 18 authorities have more tied up in Icelandic banks than in their own reserves. |
| The Audit Commission said most councils had "heeded warnings" about the declining credit worthiness of Icelandic banks during 2008 and taken action accordingly. | The Audit Commission said most councils had "heeded warnings" about the declining credit worthiness of Icelandic banks during 2008 and taken action accordingly. |
| However, it said that some had ignored the risks while a handful had behaved "negligently". | However, it said that some had ignored the risks while a handful had behaved "negligently". |
| Undoubtedly some mistakes were made especially by the seven authorities which continued to invest money in Iceland at the end of September Steve Bundred, Audit Commission Full list of council deposits | Undoubtedly some mistakes were made especially by the seven authorities which continued to invest money in Iceland at the end of September Steve Bundred, Audit Commission Full list of council deposits |
| It reserves particular criticism for institutions which continued to deposit money after 30 September, when the credit ratings of Glitnir and Landsbanki were downgraded to "adequate" - below that deemed acceptable under guidance to town halls. | It reserves particular criticism for institutions which continued to deposit money after 30 September, when the credit ratings of Glitnir and Landsbanki were downgraded to "adequate" - below that deemed acceptable under guidance to town halls. |
| Just over a week later, the two banks went under. | Just over a week later, the two banks went under. |
| According to the commission, the South Yorkshire Pensions Authority deposited £10m on 2 October while Kent County Council made two deposits totalling £8.3m on 1 and 2 October. | According to the commission, the South Yorkshire Pensions Authority deposited £10m on 2 October while Kent County Council made two deposits totalling £8.3m on 1 and 2 October. |
| Other councils which made deposits during the period in question were: North East Lincolnshire Council, Redcar and Cleveland Borough Council, Restormel Borough Council, the London Borough of Havering and Bridgnorth District Council. | Other councils which made deposits during the period in question were: North East Lincolnshire Council, Redcar and Cleveland Borough Council, Restormel Borough Council, the London Borough of Havering and Bridgnorth District Council. |
| Alleged mistakes by authorities included the failure, by one, to open an e-mail notifying it of the ratings change, use of obsolete information and exceeding limits for deposits in a single bank. | Alleged mistakes by authorities included the failure, by one, to open an e-mail notifying it of the ratings change, use of obsolete information and exceeding limits for deposits in a single bank. |
| 'Absolutely refuted' | 'Absolutely refuted' |
| "Undoubtedly some mistakes were made especially by the seven authorities which continued to invest money in Iceland at the end of September," said Commission chief executive Steve Bundred. | "Undoubtedly some mistakes were made especially by the seven authorities which continued to invest money in Iceland at the end of September," said Commission chief executive Steve Bundred. |
| "By the end of the September the Icelandic banks had been downgraded and it was known that the credit ratings agencies were issuing warnings. It was known that the Icelandic banking system was in crisis." | "By the end of the September the Icelandic banks had been downgraded and it was known that the credit ratings agencies were issuing warnings. It was known that the Icelandic banking system was in crisis." |
| Training for council executives which manage investments should be improved, the Commission says, while it believes government guidance puts "undue reliance" on the opinions of credit agencies and that wider information must be sought. | Training for council executives which manage investments should be improved, the Commission says, while it believes government guidance puts "undue reliance" on the opinions of credit agencies and that wider information must be sought. |
| FROM THE TODAY PROGRAMME More from Today programme | FROM THE TODAY PROGRAMME More from Today programme |
| One of the councils censored - the London Borough of Havering - said that it "absolutely refuted" claims of negligence. | One of the councils censored - the London Borough of Havering - said that it "absolutely refuted" claims of negligence. |
| It said it scrupulously followed the ratings guidance and that it made its final deposit in one of the banks 20 minutes before the news it had been downgraded came through. | It said it scrupulously followed the ratings guidance and that it made its final deposit in one of the banks 20 minutes before the news it had been downgraded came through. |
| "We were absolutely following following all our policies and procedures," said its chief financial officer Rita Greenwood. | "We were absolutely following following all our policies and procedures," said its chief financial officer Rita Greenwood. |
| She added: "We spread our risks through different countries and institutions. That is part of the government guidance." | She added: "We spread our risks through different countries and institutions. That is part of the government guidance." |
| Ministers are to look at how investment guidance can be "clarified" to make more information available to councils and to ensure taxpayers money is managed responsibly and efficiently. | |
| Local government minister John Healey said there was no evidence that any services would be cut or bills increased due to the endangered deposits. | |
| 'Convenient smokescreen' | 'Convenient smokescreen' |
| The Local Government Association, which represents 300 councils in England and Wales, said councils which deposited money after 30 September had carried out reviews as to why this took place, adding that some were contractually obliged to do so. | The Local Government Association, which represents 300 councils in England and Wales, said councils which deposited money after 30 September had carried out reviews as to why this took place, adding that some were contractually obliged to do so. |
| It stressed that three out of four English councils had no money tied up in Icelandic banks while the total amount of deposits halved between January and October 2008. | It stressed that three out of four English councils had no money tied up in Icelandic banks while the total amount of deposits halved between January and October 2008. |
| It really is a case of the pot calling the kettle black Nick Chard, Kent County Council | It really is a case of the pot calling the kettle black Nick Chard, Kent County Council |
| "There is no doubt we must learn the lessons," said chief executive John Ransford, adding that councils' banking policies would be more "cautious and measured" in future. | "There is no doubt we must learn the lessons," said chief executive John Ransford, adding that councils' banking policies would be more "cautious and measured" in future. |
| But he added that the "majority of councils' investment policy works well". | But he added that the "majority of councils' investment policy works well". |
| Kent County Council said it had been open about its conduct, admitting it had mistakenly made a £3.3m deposit on 1 October, and argued the commission needed to address its own situation. | Kent County Council said it had been open about its conduct, admitting it had mistakenly made a £3.3m deposit on 1 October, and argued the commission needed to address its own situation. |
| "The position and language used by the Audit Commission is quite extraordinary," said Councillor Nick Chard, the council's cabinet member for finance. | "The position and language used by the Audit Commission is quite extraordinary," said Councillor Nick Chard, the council's cabinet member for finance. |
| "It really is a case of the pot calling the kettle black. | "It really is a case of the pot calling the kettle black. |
| "I find this a convenient smokescreen for the Audit Commission which has twice the level of exposure in Icelandic Banks that Kent County Council has". | "I find this a convenient smokescreen for the Audit Commission which has twice the level of exposure in Icelandic Banks that Kent County Council has". |
| Investment advice | Investment advice |
| After the extent of councils' financial exposure became clear, ministers identified about a dozen local authorities that might face short-term problems as a result of the Icelandic situation. | After the extent of councils' financial exposure became clear, ministers identified about a dozen local authorities that might face short-term problems as a result of the Icelandic situation. |
| Trouble-shooters were sent to three councils but it later emerged that none had required emergency financial assistance. | Trouble-shooters were sent to three councils but it later emerged that none had required emergency financial assistance. |
| Ministers were also forced to defend their investment advice to councils, describing it as "prudent and sensible". | Ministers were also forced to defend their investment advice to councils, describing it as "prudent and sensible". |
| It is still hoped that much of the money will be recovered. | It is still hoped that much of the money will be recovered. |
| Administrators for Heritable, the UK arm of Landsbanki and UK-based Kaupthing, Singer and Friedlander have indicated the banks may have sufficient assets to cover the bulk of liabilities. | Administrators for Heritable, the UK arm of Landsbanki and UK-based Kaupthing, Singer and Friedlander have indicated the banks may have sufficient assets to cover the bulk of liabilities. |
| Officials from the Treasury and the Icelandic government have held a series of meetings to try and resolve the crisis after it led to a short-lived diplomatic spat last autumn. | Officials from the Treasury and the Icelandic government have held a series of meetings to try and resolve the crisis after it led to a short-lived diplomatic spat last autumn. |