Rapid response unit set up to help councils hit by Icelandic banking crisis » Central government » 24dash.com

A new joint rapid response unit has been set up and is in operation, ready to deploy finance experts to local authorities who need assistance following the failures of Icelandic banks.

The unit, announced by Communities Secretary Hazel Blears today, has been established by Government, the Local Government Association and the Improvement and Development Agency, to provide support to local authorities facing severe short-term difficulties.

It has a team of experts in local authority financial management in place and ready to go immediately to any authorities who need that assistance.

These steps come as part of a wider action plan of support to English councils experiencing serious short-term difficulties, the public services they deliver and the communities they serve.

In a written Parliamentary answer, Hazel Blears also said that many local authorities had already publicly stated that any risk they face was not a threat to frontline services.

However, a small number of authorities may have specific problems which is why the government was putting in place this support and expertise.

She added that no local authority had told the Local Government Association that it can not pay the wages of its staff.

Communities Secretary Hazel Blears said: "The Government's first priority has been to do everything we can to help local authorities, along with other creditors, get back the money which they had deposited in the banks.

"My Department has been working closely with the Local Government Association to ensure that individual authorities who are experiencing severe short term difficulty get assistance. The new rapid response team is up and running, with a team of finance experts ready to go immediately to any authorities who need assistance.

"We are taking this action to protect council taxpayers, communities and those public services on which the most vulnerable people in our society depend."

The Local Government Association are finalising an urgent analysis of the effects of the situation on individual local authorities. CLG and HMT ministers will be meeting again with the LGA later on this week to see what further action is needed.

Local Government Minister John Healey, who will chair tomorrow's meeting with the Treasury and the Local Government Association (LGA), said: "I have said that if a council is facing severe short-term difficulties as a result of the failure of Icelandic banks, they are not on their own and I will ensure they get rapid help.

"The joint rapid response unit announced today, with their team of experts in local authority financial management, will do just that. Tomorrow's meeting will help identify where they are needed most."

Mr Healey is also due to meet trade unions later in the week to explain what the Government is doing to support local government workers.

"Although many local authorities have said that there is not a threat to frontline services and no local authority has told the LGA that it cannot pay the wages of its staff, I appreciate this might be a worrying time for those working in local government," he said.

"That is why I plan to meet local government union representatives on Thursday to discuss what joint action Government and the LGA will take, if needed, to support the small number of authorities who may have severe problems.

"I want to send a strong message to their members that Government is prepared to take swift and decisive action. I hope this reassures the public but also those who provide those local services on which we depend."

Meanwhile, the number of councils which invested money in Icelandic banks has grown to over 116, depositing a total of £858 million, it emerged today.

The figure was revealed by the Local Government Association (LGA) as it called for a Government inquiry into how credit ratings agencies continued to give Icelandic banks high ratings days before they collapsed.

The LGA, which represents councils in England and Wales, said the banks and their UK subsidiaries continued to receive high ratings until September 30.

Margaret Eaton, chairman of the LGA, said: "This isn't the time for a blame game. This is an unprecedented situation, the extent of which could not have been foreseen.

"However, at the appropriate moment, there needs to be a full and independent inquiry to find out just how these banks continued to get relatively strong credit ratings until a few days before they went under.

"No council should rely solely on credit agencies and must use their financial nous. But there must be confidence in credit ratings as councils continue to invest billions of pounds in a whole range of financial institutions.

"Our analysis dispels the myth that many councils were investing recklessly after credit warnings were issued.

"The good news for council taxpayers is that discussions with the administrators have been hugely encouraging. The administrators considered that the book value of the assets of each business appeared to be of the same order of magnitude as the liabilities, although it is too early to give exact figures.

"The evidence shows that, overwhelmingly, town halls have acted prudently and within strict guidelines to get the best rates of interest on savings whilst investing in institutions deemed to be strong.

"If it is discovered that individual councils invested significant sums following the credit rating downgrading, the LGA expects them to set up their own inquiries to find out what happened.

"Prudent financial management means that councils put their money into a diverse range of banks to make sure that any risk is spread to minimise the impact of problems in the financial markets. We are not aware of councils that are in serious imminent liquidity problems and in the long term we are confident that vital frontline services will remain unaffected."

Here is a list of some of the local authorities so far known to have been involved:

• Kent - £50 million (£15 million with Glitnir Bank, £17 million with Landsbanki and just over £18 million in its UK subsidiary, Heritable).
• Haringey (£37 million)
• Dorset County Council (£28.1 million in temporary loans to Landsbanki and Heritable)
• Barnet (£27.4 million)
• Northumberland County Council (£23 million).
• Hillingdon (£20 million)
• Westminster (£17 million)
• Brent (£15 million)
• Caerphilly County Borough Council (£15 million with Heritable and Landsbanki)
• West Sussex County Council (£12.9 million).
• Havering (£12.5 million)
• Cheltenham Borough Council (£11 million)
• Wakefield Council (£9 million)
• Cheshire County Council (£8.5 million invested with Heritable, 4% of the council's total £200 million investment with national and international financial institutions. The council has a budget of £1 billion)
• Bassetlaw District Council in North Nottinghamshire (£8 million in Glitner, Heritable, Landsbanki and Singer Friedlander)
• Bristol City Council (£8 million invested in Landsbanki)
• Wiltshire County Council (£8 million with Heritable)
• South Lanarkshire (£7.5 million with Landsbanki and Heritable)
• Derwentside District Council (£7 million)
• Dorset Police Authority (£7 million of temporary loans to Landsbanki and Heritable)
• Redcar and Cleveland (£6 million)
• Ceredigion County Council (£5.5 million)
• North Lincolnshire Council (£5.5 million in Landsbanki and Heritable)
• Sutton (£5.5 million)
• Bromley (£5 million)
• South Ayrshire (£5 million)
• Cornwall County Council (£5 million invested with Landsbanki from total investments of £360 million)
• Gateshead Council (£4.5 million).
• Powys County Council (£4 million, about 6% of its cash investments, with two Icelandic banks - Landsbanki and Glitnir)
• Gwynedd Council (£4 million deposited with Heritable).
• Rotherham Borough Council (£3.7 million with Landsbanki and Heritable Bank)
• Flintshire County Council, North Wales (£3.7 million invested with Landsbanki)
• Rhondda Cynon Taf County Borough Council (£3 million deposited with Heritable).
• Solihull Metropolitan Borough Council (£3 million)
• North Somerset Council (£3 million with Landsbanki)
• Doncaster Council, in South Yorkshire (£3 million)
• Stroud District Council (£3 million)
• North East Lincolnshire Council (£2.5 million deposited with Landsbanki out of a total of £90 million of investments)
• Cotswold District Council (£2 million)
• Gloucester City Council (£2 million)
• Moray Council (£2 million deposited with Landsbanki)
• Monmouthshire County Council (£1.2 million with Heritable)
• Tewkesbury Borough Council (£1 million)
• Lewes District Council in East Sussex (£1 million deposited in Landsbanki)
• Perth and Kinross Council (£1 million with Glitnir bank)
• Nottingham City Council is also affected but has not yet disclosed the amount.
• Hertfordshire (£28 million)
• Somerset County Council (£25 million)
• Plymouth City Council (£13 million)
• Breckland Council (£12 million)
• Gloucestershire County Council (£12 million)
• Lancashire County Council (£10 million)
• West Oxfordshire District Council (£9 million)
• Wyre Forest District Council (£9 million)
• Daventry District Council (£8 million)
• Wiltshire County Council (£8 million)
• South Lanarkshire Council (£7.5 million)
• West Lindsey District Council (£7 million)
• Cherwell District Council (£6.5 million)
• Braintree District (£5 million)
• Buckinghamshire (£5 million)
• Exeter City Council (£5 million)
• Ipswich Borough Council (£5 million)
• Oxfordshire County Council (£5 million)
• Wokingham Borough Council (£5 million)
• Oxford City Council (£4.5 million)
• Colchester Borough Council (£4 million)
• East Lindsey District Council (£4 million)
• East Staffordshire Borough Council (£4 million)
• South Oxfordshire District Council (£2.5 million)
• Great Yarmouth (£2 million)
• Hertsmere Borough Council (£1 million)
• Kirklees Council (£1 million)
• Vale of White Horse District Council (£1 million)
• Winchester (£1 million)
• Amounts for Bracknell Forest, Burnley Council, Chorley Council, North Ayshire, Surrey County Council and Wychavon District Council are all to be confirmed.
• Rushmoor Borough Council confirmed it had a total of £2 million invested in Glitnir.
• Winchester City Council said it had £1 million invested in Heritable Bank.

The following local authorities have confirmed they have no money invested in the affected banks:

• Brighton and Hove City Council.
• East Sussex Council.
• London Borough of Merton.
• Forest of Dean District Council.