Ministry of Housing, Communities and Local Government
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Healey - help for local authorities with cash in Icelandic banks
The Government has acted to protect the public from potential service cuts or council tax increases that could result from local authority investments in Icelandic banks while efforts continue to recover the money.
Local Government Minister John Healey has laid regulations before Parliament that enable authorities to postpone any possible budgetary impact of this until 2010-11.
Without this help, they would have to make immediate provision for possible losses in their revenue budgets - with potentially serious impacts on council tax or services.
New statistics published today show that as at the end of last year, 125 local authorities in England had outstanding investments of around £923.2million in Icelandic banks
John Healey said:
"Following the failure of Icelandic banks last year the Government - with the Local Government Association - acted immediately to ensure no local authority faced serious short term difficulty as a result. We continue to work closely with the banks and Icelandic authorities to help local authorities and other creditors recover their money.
"This money isn't lost but it is at risk so under normal financial rules this risk would need to be taken into account in their budgets. I was concerned about the possible, and potentially unnecessary, effect this could have on services and council tax. That's why I am taking this exceptional step that gives authorities some breathing space that should allow them to be clearer what sums, if any, are still at risk. Meanwhile the Government will continue its efforts to ensure that investors recover as much as possible from the banks."
The regulations come into force on 31 March 2009 and apply immediately.
Notes to Editors
The regulations are the Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2009 [S.I. No. 321] made under the Local Government Act 2003.
The effect is for the time being to neutralise the revenue charges for the losses required by accounting practice. However, an authority taking advantage of that relief will be required to make the charges in 2010-11. By then it should be clearer to the authority how much will be recovered.
The new regulations can be found at:
http://www.opsi.gov.uk/si/si2009/uksi_20090321_en_1
The CLG informal commentary on the regulations can be found at:
http://www.local.communities.gov.uk/finance/capital/amreg.htm
Guidance by CIPFA (the Chartered Institute of Public Finance and Accountancy): http://www.cipfa.org.uk/pt/pt_details_l.cfm?news_id=59274 http://www.cipfa.org.uk/pt/download/laap79.pdf
Today's updated survey of English local authority investments in Icelandic banks can be found at http://www.local.communities.gov.uk/finance/stats/iceland.htm
Media Enquiries: 020 7944 3042
News Releases: http://www.communities.gov.uk/newsroom
