COUNCILS CRISIS – government refuses to guarantee funds

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Confident UNISON pickets at Brent Town Hall during the strike over pay on July 16th
Confident UNISON pickets at Brent Town Hall during the strike over pay on July 16th

The Brown government has pledged to do all it can to help recover public money held in failed Icelandic banks but has refused to guarantee the £858m local council deposits.

Talks were continuing yesterday between local government minister John Healey and Local Government Association council leaders over ten councils facing possible difficulties.

On Wednesday, the government sent in financial ‘rapid reaction’ task forces to review the state of three councils potentially facing ‘severe’ short-term financial problems.

Two of those have been named as Uttlesford in Essex and Wyre Forest in Worcestershire.

Yesterday it emerged that Plymouth Council has £13m invested in three Iceland banks and faces a £9m shortfall in October.

Reading Borough Council leader, Labour councillor Jo Lovelock warned of job cuts saying the council has to make ‘considerable savings’ in an effort to safeguard education, care and refuse collections, which could mean cuts elsewhere.

Reading Unison said it would ‘resist any compulsory redundancies’.

In a statement, Reading Borough Council said: ‘While some redundancies cannot be ruled out, the council has committed to keep redundancies as low as possible.’

A UNISON national spokeswoman said: ‘We have written to all councils asking them what impact deposits in Iceland may have on services and jobs.

‘Regional officials are in talks with councils locally.

‘We have warned that cuts in jobs will affect valuable local services to local communities.’

Also yesterday, government watchdog, the Audit Commission, which monitors national and local government spending, admitted it has £10m tied up in Icelandic banks.

It said it deposited £5m in Landsbanki in April this year, and a further £5m in July in the Heritable Bank.

It also emerged that Oxford University has £30m deposited in Icelandic institutions.

Money from individual colleges pooled into a central fund was invested in three banks.

Meanwhile, the Icelandic government has hired a UK law firm to examine a possible lawsuit against Britain after the Treasury froze the UK assets of Landsbanki, one of the nationalised banks.