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BANKING CRISIS HITS CITY HALL
Council leader admits: We’ve lost £17m in Icelandic crash
THE leader of Westminster Council Colin Barrow last night admitted losses of £17million from the council purse following the Icelandic bank crash.
Cllr Barrow also admitted he did not think the government will bail them out.
But late last night the Chancellor, Alistair Darling, made it clear that local authorities would not be given the same protection as individuals.
Just a year on from the collapse of Northern Rock, the council has been accused of reckless use of taxpayers’ money by the opposition leader in City Hall.
The debacle has fuelled speculation of cuts to frontline services and an increase in stealth taxes to plug the black hole in the council’s finances.
Councillor Paul Dimoldenberg, leader of the Labour group, called on chief executive Mike More to “open the books” after Westminster joined seven other local authorities across the capital in writing off £97million of investments.
The sum was invested in two Icelandic banks, Heritable Bank and Landisbanki, in August when they were said to have “excellent credit ratings”.
Just two months later their rating plummeted without warning before the council’s investments had matured.
In his first real test as leader, Cllr Barrow promises that services will remain steadfast despite the turmoil.
Finance chiefs at the council, which is now frantically lobbying the government to underwrite the loss, deny charges of a cavalier ?investment strategy.
Cllr Dimoldenberg has called for a review of the council’s investment strategy, fueling speculation that the council may have been reckless – investing taxpayers’ money in high risk “get rich quick” accounts.
Just a year ago the council came under attack for its use of creative investments following the collapse of Northern Rock.
Cllr Dimoldenberg said: “Once again, the council has lost huge amounts of money in its investments. There must be total transparency in the council’s financial situation so that important decisions can be made on future spending. We have asked for an urgent meeting to discuss the state of the council’s finances.
“I am worried these were risky and rash investments. The fact that only 20 local authorities in the whole country had money in them points to this. This is the danger of chasing higher interest rates.
“Our biggest worry is the effect on frontline services and the use of stealth taxes. Yes the council has money, but it does not have the £70million safety net it claims.”
Cllr Dimoldengerg’s claims have been echoed by the Taxpayers’ Alliance, which has labelled the investments a disgrace and accused the councils of making poor financial decisions.
In a bid to ease fears, the council has claimed the catastrophe “poses no threat to council jobs or services” because of its £70million reserves.
Cllr Barrow declined to speak to the West End Extra. In a statement issued to the press he said: “We remain in a strong financial position and it’s very much business as usual.
“It’s important to stress that there is absolutely no threat to the delivery of any of our services.
“We deliberately spread the council’s financial risk through a range of investments and deposits so that we are able to cope with the very demanding international economic situation.
”We do not currently have any indication that either the Icelandic or UK government will step in to underwrite these deposits.
“Along with the Local Government Association and London Councils we will be lobbying the government hard to underwrite these deposits and ensure far greater financial security and probity in the UK’s banking system.” |
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