Taxpayers fork out �1m after crash

IPSWICH'S investments in two failed Icelandic banks look set to cost tax payers more than �1million.

IPSWICH'S investments in two failed Icelandic banks look set to cost tax payers more than �1million.

Figures presented to borough councillors reveal that the original �400,000 estimate for lost capital and interest has rocketed by 150 per cent.

Banks in Iceland, struggling as a result of the global recession, crashed in October last year, losing depositors in Britain millions of pounds.

Local authorities, which had been assured that the high interest on offer from Iceland made the country's banks did not present an undue risk, deposited money with the institutions.

Ipswich had invested �5million with the banks, but under a deal brokered by the UK Treasury and Iceland's government, most of the money will be recovered.

However, original estimates of compensation have been wide of the mark.

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Borough council director Jonathan Owen reported that instead of the expected 95pc recovery of the �4m deposited with Landsbanki, Ipswich will only get back 83pc.

The council is set to lose �680,000 of its Landsbanki deposit and �200,000 of the �1m it had invested with the bank Heritable. Loss of interest has been calculated at an additional �213,360, giving a total deficit of �1,093,360.

Ian Blofield, head of finance at the council, said the council, in common with all local authorities affected by the defaulting banks, had published the figures to allow its 2008-09 accounts to be signed off by the auditors.

However, it was still not sure what the eventual settlement from Iceland would be and the amount to be recovered could be higher.

Opposition leader David Ellesmere said: “This is a staggering amount of money to lose - �9 for every man, woman and child in Ipswich.

“The next time the Tories and Liberal Democrats put up our council tax bills or cut services, we'll know the reason why.”

n. Are you concerned by the amount of money lost? Write to Your Letters, Evening Star, 30 Lower Brook Street, Ipswich, IP4 1AN or email starnews@eveningstar.co.uk