Iceland crisis prompts borough rethink

TOWN chiefs are to take a more cautious approach to investments in a move that will leave a hole of up to £200,000 in Ipswich's budget, it emerged today.

TOWN chiefs are to take a more cautious approach to investments in a move that will leave a hole of up to £200,000 in Ipswich's budget, it emerged today.

In the wake of uncertainty over £5million invested in an Icelandic bank, Ipswich Borough Council's chief executive James Hehir said the authority will take a more prudent approach for the foreseeable future.

This will involve placing council cash in less lucrative investments meaning less returns to put towards the authority's overall budget.

Mr Hehir estimated the resultant shortfall could be anywhere up to £200,000 a year.

He said: “We are assessing the whole investment policy but you have to be careful because if you start putting money in safe investments like gilts you reduce the amount of interest you get.

“The whole of local government is going to suffer because authorities will get lower income from being extremely cautious.

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“Nobody knows where the financial crisis is going to strike next.

“All I do know is there are going to be more casualties so we have got to be careful.”

Mr Hehir added that a review of the decisions made behind the council's £5million investment in an Icelandic bank found that the authority was not at fault.

“Did we do everything right with the right credit ratings at the right time - the answer is yes.”

Ipswich Borough Council is continuing to work with government in a bid to get guarantees on the safety of the investment with Landsbanki and a UK subsidiary after the collapse of the Iceland's banking sector left councils and charities in Britain facing losses of up to £1 billion.

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