Millions of Wirral and Cheshire taxpayers’ cash at risk in Icelandic banks meltdown

Oct 10 2008 by Liam Murphy, Liverpool Daily Post

MILLIONS of pounds of Wirral and Cheshire taxpayers cash is at risk following the collapse of banks in Iceland.

Wirral Council confirmed it has a £2m bond with the Icelandic-owned Heritable Bank, and has invested a further £7.5m on behalf of the Merseyside Pen-sion Fund in Icelandic institu-tions or their UK subsidiaries.

Cheshire Council has £8.5m invested with Heritable Bank, a UK subsidiary whose parent bank, Landsbanki, has recently been put into administration by the Icelandic government.

Critics branded the invest-ments an “absolute disgrace” and said those responsible should consider their positions.

Lancashire Police Authority has also confirmed that on September 2 of this year it invested less than £1m for three months with Landsbanki.

The investment was made via Lancashire County Council and represents less than 2% of the authority’s total investments.

One authority – Kent County Council – has £50m deposited in Icelandic banks, while more than 20 others are thought to have exposure running into millions of pounds.

Barnet Council, in north London, is thought to have in the region of £27m deposited.

Mark Wallace, campaign direc- tor at the TaxPayers’ Alliance, said: “People will be shocked coun- cils had this money stashed away.

“Every year we hear that councils don’t have enough money, and need to raise taxes, but it seems they have had sufficient excess tax to salt tens of millions of pounds away. The fact they have invested this money and seem to have lost it is even more shocking and sadly another reminder of the poor financial management in local councils.”

He continued: “It’s an absolute disgrace. If the councils can’t get their money back, the people who took these excesses should seriously consider their positions as councillors.”

But Wirral Council has insist-ed the investments are expected to be honoured and Cheshire Council spokesman Ian Callister said: “While the money is appar-ently at risk because the bank has frozen all its assets, the situation remains highly complex and is changing daily.”

Mr Callister said: “The money was invested in accordance with the Treasury Management Strat-egy to spread the risk by placing deposits with a large number of highly credit-rated institutions to get the best possible return for our Council Taxpayers.

“It was approved by council and managed in line with best practice principals and Govern-ment guidelines.

“Consequently, we are liaising with the Local Government Association to try to establish whether the Government will give similar protection afforded to individual savers.”

Cheshire County Council has £200m invested with national and international financial institutions. The Heritable Bank investment represents just 4% of its total portfolio.

A spokeswoman for Wirral said: “The impact on Wirral Council is minimal. However, we will continue to monitor the situation closely.”

MARKETS – LDP BUSINESS: PAGE 17

liammurphy