Search for
Search for
Search forCouncil tax bills 'could rise for 25 years'
Saturday, October 11, 2008, 10:00
A dozen public bodies in the Westcountry have £100 million frozen in troubled institutions in the North Atlantic island. Those exposed include town halls, police authorities and fire services.
Prime Minister Gordon Brown yesterday insisted the Government was "doing everything in our power for the money to be returned". He said UK ministers were talking to the Icelandic authorities and taking legal action to secure investments at risk.
But Tony Travers, local government expert at the London School of Economics, warned that councils would have to increase bills. He said: "Something has got to give. If it's not council tax then it will be service cuts. What could happen is councils borrow money. It takes 25 years of increased council taxes at possibly five per cent to pay that off."
However, the Local Government Association said the organisations affected should be able to weather the storm. Spokesman Ed Welsh said that the money was in the foreign banks to earn interest rather than to be used for current expenditure so the crisis was unlikely to cause immediate problems. He said: "We are hopeful this will not have an impact on frontline services. In the long term, there may be an issue but it means deferring payment or tightening our belts."
And he defended local authorities' failure to withdraw their money from Icelandic banks sooner, arguing that no-one could have predicted the crisis.
"Everyone has got this wrong, this is not just an issue about councils," he said. "This is an enormous problem for many countries in the world, for most banks in the world. No-one was keeping up to speed with it. No-one could have predicted this a year ago."
Among those most at risk are: Somerset County Council, which has £25 million invested in three affected Icelandic banks; Dorset County Council which risks losing £28.1 million; Plymouth City Council with £13 million tied up, and Cornwall County Council which has £5 million in Landsbanki. South Hams District Council, Mid Devon District Council and Restormel Borough Council also risk losing millions.
Treasury officials spent yesterday in Iceland for urgent talks over the collapse of the country's banking sector.
The crisis has sparked a furious war of words between London and Reykjavik, with Mr Brown denouncing the "totally unacceptable" failure of the Icelandic authorities to guarantee UK depositors would get their money back.
Icelandic prime minister Geir Haarde in turn blamed Britain for the collapse of his country's third largest bank, Kaupthing, after the Government used anti-terrorism laws to freeze Icelandic assets in the UK.
The Government has promised individual savers with deposits in Icelandic accounts that it will reimburse any losses they suffer, but it has been resisting calls to extend the guarantee to local authorities and the charitable sector.
Nationally more than 100 councils, as well as police forces, fire services and transport authorities, have deposits running into millions of pounds each in the crisis-hit institutions.
Private companies are thought to have in excess of £10 billion in Icelandic accounts they are unable to access. Charities, too, have tens of millions of pounds on the line. It also emerged yesterday that some NHS foundation trusts have millions of pounds at risk, but the exact location of the hospitals affected has not been released.
Pet Insurance- 5% Online Discount
UK Pet Insurance. Buy instantly online. From just £4.85 per month.
Tesco Car Insurance - Get a Quote
Tesco Car insurance - up to 15% discount when you buy online.
Earn money free online. Work from home and earn money today.
Comment on this story