by René Lavanchy
COUNCIL bosses were hopeful this week of avoiding the worst effects of the financial crisis, as they held emergency talks with the Government and accountants over local authorities’ investment in failed Icelandic banks.
More than £850 million has been invested by English and Welsh councils in the collapsed firms Glitnir and Landsbanki – which the Icelandic government has nationalised – and their British subsidiaries.
Media reports last week suggested that some authorities would not be able to pay bills and staff as a result.
But the Local Government Association said this week it was hopeful of recovering £300 million of investments held in Heritable and Kaupthing Singer & Friedlander, which are owned by Icelandic banks but based in Britain.
A spokesperson said: “We’re hoping that a significant amount of that money will come back to local authorities. Whether we get the full value of the assets on the open market is another matter.”
And following meetings between the LGA and officials from the Treasury and Department for Communities and Local Government, both sides issued a statement this week saying there was “no reason” to think wages or services at any council were at risk.
Ministers have sent financial experts to the hardest-hit councils to offer advice. The LGA said the Government was prepared to “sit down and work out in a case-by-case basis what financial package local authorities need.”
Unison, which represents some 600,000 local government workers in England and Wales, has written to all councils asking them for the details of their investments and steps they are taking to recover the money.
Heather Wakefield, Unison’s head of local government, said: “We want to know how much money is invested, what the money was earmarked for, what’s the likely impact and what the council is doing to get the money back.
“It’s clear that millions of pounds of council taxpayers’ money from across this region are at risk. And that is bound to lead to severe consequences, unless the money is recovered quickly. We want to discuss with councils the impact on services and jobs.”
The banking collapse, which will lose councils millions of pounds in interest payments, comes as unions prepare a new inflation-busting pay claim for next year.
Unison, Unite and the GMB are reported to be preparing to submit claims next month, despite continuing disputes over this year’s pay offer.
All three are expected to ask for a rise above the rate of inflation, currently 4.8 per cent by the CPI measure and well above current offers running between 2.45 and 3 per cent.
