Paying the price for Icelandic bank freeze

TAXPAYERS' are losing £1m in interest each year because of the £23m caught in the Icelandic banking system, it has been revealed.

Last month Northumberland County Council admitted it held 23m of cash in risky investments in the collapsed Icelandic banking system.

But now the authority has confirmed it is losing around 1m each year in interest on the frozen investments.

And opposition councillors demanded to know just what impact the loss in revenue will have on frontline Council services.

Conservative and Independent Group Leader Peter Jackson told a meeting of Northumberland's full Council that someone needed to take responsibility for the fiasco.

"We have been told that this will have no effect on the Council's services," he said.

"Well that just does not make common sense. The interest on the 23m is about 1m each year.

"Its quite obvious that it will have an impact on frontline services.

"I'm quite concerned about the advice this authority has been given. Those who work in the financial community began downgrading their investments held in Iceland in January.

"It was even brought to the public's attention with articles in the national press in February. So to say the warning signs were not there is just false."

It also emerged Northumberland County Council increased its holdings in Icelandic banks just weeks before the tiny nation's financial system collapsed. On September 10 the authority placed a further 1m in a three-month investment.

"It is about time this Council started to take responsibility for its actions," said Coun Jackson.

But Coun Andrew Tebbutt, Executive Member for Corporate Services, said he was not informed about the September investment.

"There was 1m invested in September on a three-month basis," he confirmed. "I was not consulted about it, nor should I have been under the current delegated decisions procedure. That is maybe something that needs to be looked at, but under present rules no member of this Council should be consulted."

Some 108 councils — along with Police Forces, fire services and transport authorities — have confirmed they had investments with Icelandic institutions. Only nine UK authorities caught up in the crisis have more cash at risk than Northumberland.