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Peterborough could lose £3m in Iceland banks collapse



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Published Date:
10 October 2008
11.45am: Action is being taken today to safeguard £3 million of Peterborough council taxpayers' money which has been deposited in two failed Icelandic banks.
Peterborough City Council chiefs have revealed that £3 million had been deposited with the UK subsidiaries of two Iceland-based banks.

Some £2 million has been invested with Kaupthing Singer and Friedlander, which is the UK subsidiary of Kaupthing Bank and which has been placed into administration.

And a further £1 million has been deposited with Heritable Bank, a subsidiary of the collapsed Landsbanki.

The city council is one of about 100 local authorities across the UK that have been left exposed by the banking failure in Iceland, with total investments at risk thought to be more than £720 million.

What do you think?
Comment below, email us: news@ peterboroughtoday.co.uk or telephone the newsdesk 01733 588719.

Related:
National news: Video: Treasury in Iceland for bank talks, 10 October 2008.
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The city council's investments are among the smallest, with Kent County Council topping the list with deposits of £50 million.

Neighbouring Cambridge City Council has £9 million deposited in Icelandic banks made up of £5 million with Landsbanki and £4 million with Heritable Bank.

Peterborough council leaders moved swiftly yesterday to reassure residents that the matter will not have any impact on day-to-day services and will not mean an increase in council tax bills.

The local authority has an annual budget of £237 million and investments of £88 million spread across 30 different banks and building societies in the UK and overseas. Last year, its investments generated £4.6 million in interest for the city council.

Council leader Cllr John Peach said: "People in Peterborough will not be affected by this at all.

"There will not be any impact on the day-to-day business of the city council, on frontline services or on council tax."

He added: "This is a prudent and well-run council, and we have £6 million in reserve to balance any loss."

But Cllr Peach was adamant that the city council was not to blame for the decision to invest in Icelandic banks.

He said: "The money was invested in triple A-rated savings and institutions that had been rated by the Treasury."

He added: "We are supporting the Local Government Association's ongoing discussions with the Treasury to obtain assurances that its investments will be fully protected in Icelandic banks."

GMB union national officer Brian Strutton said: "I believe the financial effects will be smoothed over through a combination of using council contingencies and reserves, together with help from central government.

"However, there are some serious questions that need to be answered.

"What are councils doing with spare money? Why are they using high-risk accounts? Is it a coincidence that so many of them have invested in these uncertain Icelandic banks?"

Campaign director at the TaxPayers' Alliance Mark Wallace, said: "People will be shocked that the councils had this money stashed away in the first place."

The full article contains 508 words and appears in Peterborough ET newspaper.
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  • Last Updated: 10 October 2008 12:54 PM
  • Source: Peterborough ET
  • Location: Peterborough
 
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Outcast,

10/10/2008 12:33:24
Does this article mean they are prepping us for Council tax hikes ?
2

Josh P,

10/10/2008 12:39:15
Well run!!! We've all known for weeks that the Iceland banks are in trouble and companies/institutions have been withdrawing cash from these banks for weeks now... What have these idiots at the council been doing ??? There is only one answer to this council mess. Incompetence!!!!
3

twink,

10/10/2008 12:42:50
As a taxpayer (council tax), I think we should be asking some questions. First, where is our money? 3 million has been potentially lost, but where is all the rest banked? Secondly, why do we have such surpluses in the first place - especially when our council tax is increased each year? Perhaps we aren't on the same scale as some local authorities (which is why the first question needs an answer) with over 10, 20, or 50 million lost, but was that much even amassed in the first place. I understand there needs to be cash for a rainy day, but 50 million? We pay council tax for the benefit of the local population, not so it can be hoarded in bank accounts earning interest or, in this case, being lost. How many times to we get told 'there isn't enough money'? Looks like there may have been...
4

Crowlord,

10/10/2008 12:43:25
Well I guess us council employees better gird our loins for even more "we have no money" talk from our oh so caring overlords.

On the subject of council tax, its no wonder the council has no money as they didn't bother increasing it particularly again this year.

Well we can all rest assured the the few quid they are spending on the redevelopment of Cathedral Square etc will be well spent. I mean its not like the bins are overflowing and staff morale is at an all time low due to the councils absolute inability to even negotiate amicably with the unions or to handle the simple Job Evaluation appeals process.

(I personally still do not know if my pay drop in just under a year and a half will be negligible or almost 10% of my pay)

I was proud to work for PCC but now....well lets just say euphemisms about functions in brewery's would be more then apt.
5

nnooop,

Dogsthorpe 10/10/2008 13:14:09
Why should Council taxes be raised - we pay enough already and get little for it. Huge sums seem to be spent on digging up roads that have only been recently laid - and now we are told that money is being invested abroas.And beleive me - you don't know that half of it about this Council. It's time that all was laid bare and investigation instigated into the goings on at the Town Hall
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Chiefy,

Bretton 10/10/2008 13:23:22
It is irrelevant that"The city council's investments are among the smallest, with Kent County Council topping the list with deposits of £50 million." It is still £3 million of OUR money.
IF the PCC doesn't get this amount back,it is inevitable that either services will have to be cut back of the council taxes increased.
Best solution is to sack all the PCC officials that were handling the finances and recruit new staff from
the job centre.
Beggars belief!
7

Dan Jackson,

10/10/2008 13:46:55
PCC technically cannot be blamed for this. All councils are given a list of organisations by the Bank of England and Treasury that are classed as safe and given ratings to show this.

My biggest issue here is why the Icelandic Banks still had a triple A rating last week and why the IMF etc had not warned of these issues as they knew.
8

BigTed,

Stanground 10/10/2008 13:52:43
I seem to be the only one that feels it wise of the council to invest money which has then reduced the burden on us council tax payers by £4.6m a year. This is money that we council tax payers have not had to come up with year on year.

My concern is that the £88m invested is no longer worth that amount and the shortfall in that £4.6m a year return on investments will need to be found somewhere - most likely by being passed on to us already struggling council tax payers.

Perhaps the extra money could come form council tax dodgers instead? Call it interest on past missed payments.
9

waynesill,

10/10/2008 14:02:43
Don't panic everyone knowing PCC they have put there money in Iceland the foodstore ;@)
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Josh P,

10/10/2008 14:49:16
Dan, absolute truffle.... PCC like everyone else has watched the episode unfold over the past few weeks with regards to Iceland and done nothing. There are plenty of idiots there being paid a lot of money to make decisions. Yes, they had a AAA grading but the likelyhood is that they probably sat on there hands like they do most days. WHAT DO YOU GUYS EXPECT WHEN THEY OFFER INCREDIBLY HIGH RETURNS? HOW DO YOU THINK THE BANK GENERATES THESE RETURNS. HIGH RETURNS = HIGH RISK.
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