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THE Government has seized more than enough Icelandic assets to pay back British savers caught up in the country’s banking collapse, it was revealed yesterday.
Some £4bn is understood to have been frozen using anti-terror laws last week, compared to the estimated £3bn that UK councils, charities and individuals stand to lose.
Last week, 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 Pension Fund in Icelandic institutions or their UK subsidiaries.
And Cheshire Council has £8.5m invested with Heritable Bank, a UK subsidiary of Landsbanki, which has recently been put into administration by the Icelandic government.
Treasury Chief Secretary Yvette Cooper insisted the seized assets would not be released until a deal had been struck with Iceland to return British money. Ms Cooper said the UK had sent negotiators to Iceland, and added: “These discussions are under way at the moment and that is why we have frozen assets in the meantime until we know how people are going to get their money back.”
The scale of the assets frozen emerged amid fears that the banking collapse may mean some councils cannot pay their staff this month.
Most of the estimated £1bn invested in Iceland by local authorities was capital, but according to reports at the weekend a handful of councils had deposited revenue budgets – which include payroll – to earn interest.
But an LGA spokeswoman stressed that all councils held reserves, and it was “highly unlikely” there would be any impact.
“We are not aware of any councils which have immediate cashflow problems in terms of services or paying staff,” she said.
The LGA is urging the Government to relax capitalisation rules for hard-hit councils and allow them to delay payments of business tax rates if necessary.
The Treasury delegation conducting negotiations in Iceland said last night “significant progress” had been made.
A deal has already been done in principle over an accelerated payment for small UK depositors. However, the situation with larger investors has yet to be resolved.
