Iceland crisis costs Sussex £21m

Oct 11, 2008
By Miles Godfrey

The meltdown in Iceland’s banking sector has cost Sussex taxpayers more than £21 million, The Argus can reveal.

Sussex Police had £6.8 million invested in high interest Icelandic accounts while West Sussex County Council had £12.9 million and Lewes District Council £1 million.

Brighton and Hove City Council withdrew its funds a year ago.

No other Sussex councils invested in Iceland.

It remains unclear whether any of the authorities will recover their money after Chancellor Alistair Darling refused to guarantee the funds of large depositors.

The British Government has guaranteed smaller investors in Icelandic banks up to £50,000.

The country’s three main banks, Kaupthing, Landsbanki and Glitnir have been nationalised in the wake of turmoil across the world’s economies.

Bryan Robinson, treasurer of West Sussex County Council and Sussex Police Authority, was responsible for the two authority’s investments, totalling £19.7 million, and defended his policy.

Mr Robinson rejected the view of the Taxpayers’ Alliance which claimed the collapse of the Icelandic banks was predictable. But he announced the two organisations would only invest in British banks in the “forseeable future”.

A spokesman for the Taxpayers’ Alliance said: “These authorities constantly defend their tax rises by saying they need to employ experts to monitor these sorts of things.

“But it is clear they have not provided a good service here and taxpayers in Sussex are losing substantial sums of money.”

Mr Robinson responded: “Hindsight is a wonderful thing but these banks had the highest pan-European credit rating.”

He remains hopeful of recovering the cash because it was invested in British-registered arms of the banks.

The losses by West Sussex County Council amount to around 5% of its reserves.

Sussex Police said its investment of £6.8 million, set against an annual budget of £250 million, would not affect policing. A spokesman said: “It is a matter of concern but this will not impact on the day-to-day policing of our community.

“We are concerned and we are watching developments closely.”

Brighton and Hove City Council said it was able to predict the demise of Iceland’s banks.

City councillor Jan Young said: “We suspended transactions with the one we had on our books about a year ago after picking up concerns in the marketplace about Icelandic banks expanding too quickly.”

Lewes District Council Leader Ann De Vecchi said its services would be unaffected but called on the Government to intervene.

She said: “We firmly believe the situation is a consequence of the current global market instability and that the Government should assist the many councils affected.”

Source: The Argus