2008-11-27 08 h 15 :: lgcplus.com :: Protection from Iceland losses

http://www.lgcplus.com/creditcrunch/2008/11/healey_protects_taxpayers_from_iceland_bank_losses.html;jsessionid=0E03D8A56C097C9302723DA01D599852

Protection from Iceland losses

Local government minister John Healey has moved to prevent councils' £900m exposure to the collapse of Icelandic banks being passed on to council tax payers.

Mr Healey has unveiled regulations allowing local authorities to avoid having to make provisions for potential losses from Icelandic banks when preparing next year's budgets.

"We will make sure councils are not preparing budgets or council tax levels with a financial hit that may not follow," Mr Healey said. "We don't yet know how much and when councils are going to get money back."

Councils have deposits of £555m frozen in Landsbanki and Glitnir, both of which are in Icelandic receivership, and £366m in Heritable and Kaupthing Singer & Friedlander, which are in administration under UK law.

None of the receivers or administrators has yet indicated what proportion of deposits might eventually be recovered.

For the LGA, chair Margaret Eaton said: "This move will give councils much needed breathing space to deal with the potential hit they may have to take on deposits in Icelandic banks. LGA lobbying has ensured that it will help to shield council taxpayers but we need to make sure that it isn't simply a temporary reprieve.

"Town halls are working closely with the Government, the administrators and the Icelandic authorities to make sure that as much money as possible can be retrieved and that the council taxpayer should not have to foot the bill."

Ian Carruthers, director of policy and technical at the Chartered Institute of Public Finance & Accountancy (CIPFA), said: "Based on initial reports, CIPFA believes that these measures will enable local authorities to plan for the coming financial year with a welcome degree of clarity."