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UK councils seek assurance from Icelandic authorities

12/10/2008

British council chiefs are to meet with Icelandic officials over fears that their investments may have been lost during the country's banking collapse.

After Iceland was forced to nationalise its main banks, UK councils' deposits - worth some £842.5 million - may be at risk.

About 100 councils in England, Scotland and Wales have deposits in Icelandic banks, many of which are payroll funds invested to earn interest.

And with UK deposits frozen in the now-nationalised Icelandic banks, there are fears that some council workers may not be paid.

The Local Government Association (LGA) has moved to allay fears by stressing that local councils have reserve funds and the majority of staff are unlikely to be affected.

However, the BBC's John Andrew claims UK councils will request help from the government and ask that they be allowed to keep revenue earned from business rates.

The LGA's meeting with the Icelandic ambassador is due to take place next week and the representative body has confirmed its commitment to taxpayers by claiming it will take its case directly to the Icelandic government if necessary.

It was confirmed yesterday that a British Treasury delegation had held "friendly" talks in Iceland over the country's banking collapse.

The UK delegation landed in Iceland on Friday with the aim of retrieving the £20 billion of assets held by UK savers, councils, charities and businesses.

And in a joint statement, the British officials and the Icelandic authorities confirmed "significant progress" had been made on recouping private savers' money.