Taxpayers' money at risk

MILLIONS of pounds of Ipswich taxpayers' money may be in jeopardy as a result of the current global economic turmoil, it emerged today.

As revealed on the Evening Star's website, www.eveningstar.co.uk, Ipswich Council has up to £5million invested with troubled Icelandic bank Landsbanki, which has been taken over by its government to keep it afloat.

Town chiefs are currently in talks to try and ensure the money invested in an Icelandic bank is safe.

In total the cash makes up more than 12 per cent of the council's estimated £40m investment portfolio.

It is unclear whether other councils in the county have invested with Landsbanki although the county today said it has no dealings with the bank.

Ian Blofield, head of finance at the borough, told the Star the way the money has been invested means it cannot be returned early.

However work is going on behind the scenes to ensure the Landsbanki investment is not lost.

“We are waiting to see how the situation with Landsbanki pans out,” he said.

“Other than petitioning government through the Local Government Association (LGA), which we will be doing to see if we can get some certainty and security, there is nothing we can do.

“The contract is binding and we cannot withdraw the money early like a private investment in a savings account.

“We are getting daily advice from treasury consultants about what is going on in the markets.”

Mr Blofield said the council has been investing with Landsbanki for several years and it was previously rated as one of the most secure investments available with an F1A rating.

According to the LGA, which represents councils in England and Wales, more than 20 authorities in the UK are believed to have deposits in Landbanksi or Heritable.

The UK government has pledged to guarantee the savings of individuals who have invested money with another Landsbanki subsidiary, internet-based Icesave, although it is not clear if this extends to public sector organisations.

The LGA says despite the situation it does not expect "significant financial problems" in the short term as town halls put money in a wide range of investments with different banks and frontline services should not be affected.

It is calling for councils to have the same protection as private savers.

Are you concerned taxpayers will be left to foot the bill if the council's investment cannot be retrieved? Write to Your Letters, Evening Star, 30 Lower Brook Street, Ipswich, IP4 1AN or e-mail eveningstarletters@eveningstar.co.uk

One authority - Kent County Council - has £50 million deposited in Icelandic banks while Barnet Council in north London is thought to have in the region of £27 million deposited and Westminster Council said it had £17 million with Icelandic institutions.

Mark Wallace, campaign director at the TaxPayers' Alliance, said: "People will be shocked that the councils had this money stashed away in the first place.

"Every year we hear that councils don't have enough money and need to raise taxes but it seems they have had sufficient excess tax to salt tens of millions of pounds away.

"The fact that they have invested this money and seem to have lost it is even more shocking and is sadly yet another reminder of the poor financial management in local councils.

"In short, they should not have stashed this money in the first place and they simply weren't equipped to try to be clever in the markets with it.”