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Councils optimistic over Icelandic cash

PUBLISHED: 10:49 26 May 2009 | UPDATED: 13:58 03 July 2010

MILLIONS of pounds of council taxpayers' cash - currently frozen in Icelandic Banks - could start flowing into Norfolk councils' coffers within weeks, it has emerged.

MILLIONS of pounds of council taxpayers' cash - currently frozen in Icelandic Banks - could start flowing into Norfolk councils' coffers within weeks, it has emerged.

Norfolk County Council and two local authorities invested more than £40m in Icelandic banks which crashed earlier this year.

Norfolk County Council, Breckland Council and Yarmouth Council, along with other local authorities across the country, invested millions in various accounts hoping it would reap hefty returns but now remains frozen since the collapse, which sent shock waves through the financial world, in October last year.

But an investigation into what has happened to the cash and when it is likely to be returned has revealed a generally optimistic view that most of the missing millions will come back, although the exact time-scale is still unknown.

Breckland, which had £12.0m deposited across three Icelandic banks, Landesbanki, Kaupthing Singer and Friedlander and Glitnir, says that it is set to see £400,000 of the £4m invested in Kaupthing Singer and Friedlander returned into its coffers in July followed by four further payments to 2012.

The authority had £6m deposited with Landesbanki and it is hopeful of seeing £1.5m before the end of the current financial year which closes in April 2010. Again there would be three further payments up to 2012.

There was £2 million invested with the Icelandic Glitnir Bank and it is hoped that all the money could be back with Breckland by the end of the financial year.

A spokesman for the authority said that it had been following advice from the Local Government Association and the picture, which in the early days, looked bleak now appeared “encouraging and quite positive”. But it was stressed that the indications over exactly when the monies will be returned was an estimate only.

The missing millions has had no effect on services run by the Dereham-based Breckland authority and also had no impact on the amount charged this year to the area's council tax payers.

“The effect of the frozen investments has not had any effect on services and, because of contingency arrangements, nothing has been cut from the capital programme,” said a spokesman.

Breckland chief executive Trevor Holden said: “Breckland Council's response to the Icelandic Bank situation was applauded by the Local Government Association as exempla and I am extremely pleased this has contributed to the increased prospect of the funds at risk being returned.”

Yarmouth Council is optimistic that it will see 70 to 80 per cent of its missing £2m back - with 15 per cent coming back in August this year. It is anticipated there will then be 15 per cent annual repayments.

The authority has been working with the LGA because it is their best opportunity to see as much cash returned as possible.

The authority's Head of Financial Services, Seb Duncan, said that the missing cash has had no impact on council tax charge or capital projects.

Mr Duncan said the Icelandic Bank's collapse could not have been foreseen but it was confident that it would get as much cash back as it could. “We would like to see it all come back but a lot depends on what happens in the world economy and that is beyond my remit,” he said.

Norfolk county council says it is “cautiously optimistic” that it will be able to recover the majority of the £32.5 million the authority had deposited in Iceland. “We're continuing to work with the Local Government Association and Treasury to achieve this and are waiting updates from the banks' administrators regarding exact numbers,” said a spokesman.

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