Tax rise fears after Icelandic banks crash
10 October 2008
MILLIONS of pounds of Haringey Council cash could be lost as a result of the Icelandic banking crisis, it has emerged.
The council has around £37million of deposits in three Icelandic banks which folded this week – understood to be the biggest total of any London borough.
The crisis has prompted fears of Council Tax rises and service cuts to recoup any lost funds.
Opposition politicians warned it could cost tax payers £370 a household.
But Councillor George Meehan, council leader, has moved to reassure residents.
He said: “We have sufficient resources to manage these exceptional circumstances and frontline services will not be affected because we have sound and prudent financial management in place to protect against such risks.
“Given the sums of public money involved I expect government to protect these investments. Together we will be working to safeguard our assets and ensure our investments are properly protected.
“We follow tight government guidelines and have a good track record for financial management. This issue is the result of the problems in the world economy.”
More than 100 councils along with police forces, fire services and transport authorities, have deposits totalling hundreds of millions in Iceland’s crisis hit institutions.
Haringey has £15.2million with Landsbanki, £19.8million with its British counterpart Heritable and £2million with Glitnir.
Councillor Robert Gorrie, leader of the opposition Liberal Democrats, said: “This is a staggering amount of money – potentially £370 for every household in Haringey. We need urgent reassurances that frontline services will not be affected and that the council’s other deposits are safe.
“Once the dust has settled and our remaining assets are secure we will need to understand the impact of this event on the borough’s finances and of course ask the key questions of how the council got into this mess.”
Lynne Featherstone, the party’s Hornsey and Wood Green MP, said: “I am absolutely determined that the Haringey taxpayers will not be left to pick the tab for these losses.
“I have already made urgent representations to the Chancellor Alistair Darling to demand the government guarantee is extended to councils’ deposits.”
Keith Flett, chairman of Haringey Trades Union Council, said: “The key thing is to make sure that ordinary people in Haringey don’t suffer.”
A council spokesman refused to elaborate on Councillor Meehan’s statement when asked how confident it is of the money being saved or if lost, whether Council Tax rises and service cuts might follow.
The council has been criticised by some for being slow to reveal its financial exposure to Iceland banks as the story broke on Wednesday (October 8).
One Crouch End resident, who did not want to be named, said: “The BBC News said that Haringey had been asked if it had money in the Icelandic banks and declined to confirm or deny. I think is absolutely outrageous over a matter as important as that.”
Ian Sygrave, who lives on the Harringay Ladder, is more forgiving.
He said: “It’s not their fault. I think the main concern is really whether they would get the money back and whether the Government will help them out. They’ve been responsible and invested in a reputable bank. It seems unfair that the tax payer has to pay for it.”
Prime Minister Gordon Brown has threatened legal action against the Icelandic government condemning the situation as “totally unacceptable” and insisting it has responsibility for reimbursing UK investors.
The government has reassured individuals with deposits in Icelandic accounts it will reimburse any losses they suffer.
But it is less emphatic about helping local authorities saying only it will look at situations on a “case by case basis”.
It added there is “no evidence of recklessness by local authorities”.
David Lammy, the Tottenham MP, said: “I know that many people, like me, are deeply concerned about the impact of the global financial crisis and particularly Haringey’s investment in Iceland.
“I have had a number of conversations with treasury ministers and Haringey Council, and am assured that no frontline services in our borough will be cut. Haringey has a record of sound financial management, and I am confident the government will do all it can to work with councils like Haringey to make sure this money is returned.