Council cash is still on ice

Oct 14 2008 by Les Stewart, Perthshire Advertiser Tuesday

PERTH and Kinross Council is still anxiously awaiting a vital reply from the Chancellor Alistair Darling in the wake of last week’s Icelandic banking system meltdown.

The local authority has £1 million invested in the failed Glitner Bank.

Councillor Ian Miller, leader of the administration, wrote to Mr Darling last Thursday seeking assurances that the Government would, as a matter of urgency, take action to protect the investment interests of local authorities, as has been done for the retail banking sector.

Councillor Miller stressed in his letter: “In Perth and Kinross Council, we have built a very strong and well-deserved reputation for our commitment to best value and our sound financial management strategy.

“In common with other local authorities, Perth and Kinross has adhered strictly to the CIPFA Code of Practice on Treasury Management in the Public Services.

“We invest only with those banks and financial institutions with the highest credit ratings.

“It is therefore all the more saddening that today our council finds itself facing the possible loss of £1million as a result of the financial instability in the Icelandic banking sector and specifically in respect of the council's short-term investment in Glitnir.

“I realise that the current global financial crisis is unprecedented and that no-one could have foreseen the extent of the difficulties. As you will appreciate, until recently, the credit ratings for Glitner have been very positive.

“However, you will understand that this is of little comfort to the citizens of Perth and Kinross who are clearly concerned about the impact this could have on council services.

“I would urge you to take action to protect the investment interests of Local Authorities who, like Perth and Kinross, find themselves facing financial losses which are entirely outside of their control.

“On behalf of the council and the citizens of Perth and Kinross, I look forward to hearing from you as a matter of urgency.”

Councillor Miller said yesterday that he was still awaiting a reply to that letter.

He added: “We are hoping that the Icelandic assets frozen in this country could be used to cover the £45 million that councils across Scotland have invested in Icelandic banks.”

LOCAL politicians have added their weight to calls for the Government to step in and guarantee any losses.

North Tayside MSPJohn Swinney, in his capacity as Cabinet Secretary for Finance and Sustainable Growth, has written on behalf of the Scottish Government to the UK Treasury seeking their agreement to cover deposits made by councils in Scotland, including Perth and Kinross, with the Icelandic banks.

He added: “I would also encourage steps toward a universal protection, beyond the measures so far announced, that would apply to public sector cash balances or deposits with international banks.”

Pete Wishart, MP for Perth and North Perthshire, said: “The Prime Minister and the Chancellor must accept that local authority investments must also be protected in addition to individual savers.

“It is clear that the current financial crisis is almost unprecedented and many financial institutions that were previously thought to be safe for investments are now in a state of turmoil.”

Roseanna Cunningham, MSP for Perth, added: “I welcome the assurance from Councillor Miller that there is no threat to jobs and services as a consequence of Glitnir Bank's problems.

“While £1 million is only a fraction of the council's holdings, and indeed of the £46million invested by Scottish councils in Icelandic banks, or indeed the half a billion from councils across the UK, it still represents a serious amount of money and every effort must be made to recover it.”