Borough bracing itself for loss

BOROUGH chiefs are today bracing themselves for the possibility that they will lose 90 per cent of their investments in Icelandic bank accounts.

Financial consultant Mark Horsfield, from Arlingclose which advises more than 50 councils, said those with money invested in the failed banks may have to write most of it off as market forecasts showed they might receive only 0.5p in the pound.

Ipswich Borough Council stashed around �5million in Iceland before the collapse of the country's banking sector in October. The figures makes up around 12 per cent of the council's entire investment portfolio of �40million.

John Carnall, responsible for finance at the council, said: “Negotiations are going on between the Icelandic administrators and Local Government Association. We haven't had a final decision from the LGA and the Treasury about what is going to happen.

“We would like the government to help local councils. It has thrown a lot of money at banks and the car industry, so why can't it help local councils?

“We did invest in Icelandic banks that were highly rated by credit agencies.”

Leader of the council, Liz Harsant, added: “We thought we would get back �1million. I don't think there is any light at the end of the tunnel for the other �4million. It isn't a surprise.

“There is a lot of work being done with the LGA about this. You cannot say people haven't tried and done their very best.”

More than 100 councils across the country have millions of pounds frozen in accounts in Iceland.

Interest from the savings is used to keep council tax down and fund various projects for the authority.

Mr Carnall said any funds lost would not affect services but admitted that the council will have to consider ways of recouping the money next year.

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