Icelandic Deposits
Things are getting interesting in local government (yes, you read that correctly). It seems as if upwards of 20 councils have money stashed away in Icelandic banks, and are going to have some difficulty accessing their deposits following the nationwide banking collapse.
I am amazed that councils deposit money in foreign banks. There is clearly benefit in not putting all of your eggs in one basket, but a decent spread around the British banks would surely be as safe? More safe, even, I would argue, than investing abroad. There is little that the government can do about deposits in Iceland, whereas should the British banks suffer in the same way the government could quickly step in and bail out council deposits if nothing else.
It will be very interesting to see how the councils resolve this severe problem, but retrospective thought should at least consider keeping money in the UK.
There’s an intruiging London political dimension to this, not least because Westminster (former prop: Deputy Mayor Sir Simon Milton) is involved, along with the LGA (former prop: Deputy Mayor Sir Simon Milton) and TfL (prop: Mayor Boris Johnson) and London Councils (former prop: Deputy Mayor Ian Clement). It’ll be clearer when the unnamed councils get named, but I wouldn’t be surprised to find the lion’s share of the loot coming from councils of a true blue character…
They’re saying that the Treasury encouraged them to stash the cash in the place with the highest rates, but that smacks a bit of desperation.
If they are mainly Tory councils (a list would indeed make interesting reading) then they have not a smidgen of an excuse about stashing the cash where the Treasury tells them to. Anyway, why is it only some councils who have done as instructed by the Treasury?
This story will run and run, and it will indeed be very interesting to see what emerges from it.