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District council has no money in Iceland

PUBLISHED: 10:17 14 October 2008 | UPDATED: 12:01 03 July 2010

People in north Norfolk have been assured none of their district council's cash is in the crisis-hit Icelandic banks.

But as officials switch their £24m worth of investments to even safer ground, there was a warning that the reduced rates of return could begin to bite in the future if things did not improve.

People in north Norfolk have been assured none of their district council's cash is in the crisis-hit Icelandic banks.

But as officials switch their £24m worth of investments to even safer ground, there was a warning that the reduced rates of return could begin to bite in the future if things did not improve.

And the council is also having to look into its crystal ball with longer-term forecasting, wondering what the impact the forecast recession will have on its services and £14m budget.

North Norfolk District Council deputy chief executive Sheila Oxtoby said they had been getting calls from concerned local residents about whether the authority had any investments in Iceland, and why it had any investments at all.

Money from its capital pot, mainly from the sale of former council houses, was invested to cushion the council tax, she explained.

Last year investments earned £1.36m, without which its share of the average band D tax bill of £130 would have to rise 25pc or an £33.

Investments were made with security of the money uppermost, balanced against the need to get a reasonable rate of return.

North Norfolk had never had any more in Icelandic accounts, because they did not meet the maximum credit rating required. It currently had sums ranging between £325,000 in Barclays and £4.5m with the European Investment Bank but was gradually switching funds to the government's Debt Management Office, which was more secure but had a rate 1pc lower than most.

“Hopefully this is a temporary measure, but if it continues it will have an impact on council tax payers through levels of tax or services,” said Mrs Oxtoby.

The authority also had to assess how the recession would hit services such as dealing with the homeless, housing benefits, and possible drop-offs in leisure facilities, added Mrs Oxtoby, whose finance team is checking the council's investments daily.

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