From bad to worse – today began with the news that the funds of twenty local councils – including Kent County Council – had been affected by the fall of the Icelandic banking industry. By close of play today, around one hundred and eight councils, charities, police and fire authorities were facing losses of around a billion pounds. In total, £11.5 billion in UK corporate deposits is currently frozen in Icelandic bank accounts.
With the Chancellor having promised yesterday to protect individual savers’ accounts against the collapse, many were asking today whether our government would extend the same protection to local councils. Margaret Eaton and Paul Coen, Chairman and Chief Executive of the Local Government Association pushed hard for Godron Brown to give some assurance of action.
As time ticked by, the UK Government responded, using our anti-terror laws to freeze four billion pounds worth of assets at Landsbanki, Iceland’s largest bank in the UK. Iceland’s Prime Minister Geir Haarde responded angrily, with comments reminiscent of the “Cod War” of 1975. Gordon Brown remains tough, insisting that Iceland’s actions in freezing their bank assets were ‘illegal’. Scottish local authorities also asked for the same Government protection, but the Treasury has responded that since Scottish money is devolved funding to Scotland, they have to resolve the issue themselves.
One can only hope that the decisive action taken by Gordon Brown will succeed, before cash is lost forcing many smaller authorities to begin cutting services to balance their books. On Friday, the G7 countries meet in Washington to begin to work through the growing problems and available resolutions.
But the question on everybody’s lips tonight and for days to come must be – just how much worse is this going to get?