Councils' �139m in troubled banks

Councils want the same protection as personal savers

At least �139m of public money has been invested in troubled Icelandic banks by London councils, it has emerged.

Haringey Council is thought to have �37m at risk while Barnet Council has invested �27m, Hillingdon Council �20m and Westminster City Council �17m.

Transport for London also invested �40m with Kaupthing Singer & Friedlander, which has gone into administration.

The umbrella organisation for London boroughs, London Councils, said up to �200m could be in Icelandic banks.

The Metropolitan Police Authority (MPA) has revealed it has also invested �30m in an Icelandic bank, but stressed "frontline policing services will not be affected".

The Taxpayers' Alliance labelled the investments an absolute disgrace and accused councils of making poor financial decisions.

A number of local authorities are seeking an urgent meeting with Chancellor Alastair Darling to ask the UK government for the same level of protection it has promised to personal savers.

AFFECTED BODIES Transport for London (TfL):�40m Haringey Council: �37m Metropolitan Police Authority (MPA): �30m Barnet Council: �27m Hillingdon Council: �20m Westminster City Council: �17m Brent Council: �15m Havering Council: �12.5m Sutton Council: �5.5m Bromley Council: �5m

The government has frozen all the British assets of Landsbanki.

It follows the decision by Iceland's government to take over the company, which ran the internet bank Icesave, leaving 300,000 UK residential customers unable to access their savings.

London Councils' chairman Merrick Cockell said: "While nobody could have anticipated the collapse of what were once safe deposits, the government must now act swiftly to safeguard these assets and protect London's council taxpayers.

He said London authorities had enough money "to weather the impact of this storm in the short term".

"Our experience in coping with financial difficulties will mean that local services will continue to be provided to our residents," Mr Cockell added.

'Wait and see'

A spokesman for Barnet Council said: "Barnet Council entered into a number of fixed-term investments with financial institutions based in Iceland a considerable time before the current credit crisis."

Hillingdon Council said it invested �5m with Landsbanki and another �15m in Heritable.

A spokesman for the authority said: "In these highly unusual times most councils will be in a similar position and we would expect the government to support us."

Westminster Council said it had �300m-worth of investment at home and abroad, with reserves of �70m, and the money in Icelandic banks was a small percentage of its total investments.

A spokesman said: "It's very much business as usual at Westminster.

On previous occasions we have recovered most, if not all funds and we would hope to do the same in this instance Brent Council spokesman

"Westminster Council has been awarded the highest accolades from the Audit Commission over recent years with regard to the standards of its frontline services, financial management and the value for money we offer our residents."

Brent Council said the deposits were "with good credit ratings".

A spokeswoman said: "Experience of this sort of financial issue leads us to wait and see how the administrator decides to deal with the bank.

"On previous occasions we have recovered most, if not all, funds and we would hope to do the same in this instance."

A spokesperson for Transport for London (TfL) said: "TfL has a �40m deposit with Kaupthing Singer & Friedlander, the UK subsidiary of Kaupthing Edge bank, which is due to mature on 5 June 2009.

"Our treasury strategy is regularly reviewed to ensure it is robust, particularly at this time.

"We remain fully confident in our ability to deliver transport services for passengers and our massive investment in upgrading London's transport network."

A statement from the MPA said: "Local authorities and police authorities are obliged to invest responsibly and deposit money in a wide range of banks and other financial institutions, after independent advice and within strict guidelines."

'Absolute disgrace'

Mark Wallace, campaign director at the TaxPayers' Alliance, said: "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.

"In short, they should not have stashed this money in the first place and they simply weren't equipped to try to be clever in the markets with it."

"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."

Prime Minister Gordon Brown said "further action" was being considered, but the government has so far declined to guarantee the authorities' deposits in Icelandic banks.

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