It was a blow to learn that government, Councils and charities have lost over £1 billion in the Icelandic bank collapse.
Some Councillors have asked me what should they do now? I suggest the following:
1. Co-operate fully with the Treasury and FSA, who are pursuing the Icelandic authorities to get as much of the money back as quickly as possible.
2. Set up an internal Council enquiry to discover who made the decision to put the money with the Icelandic banks, what advice they took at the time, and why the Chief Executive signed off on the deposit or the system to place the deposit.
3.Work through the Local Government Association to review Treasury guidelines and rules concerning the management of Council balances.
4. Put in place sensible new rules in your Council, in the light of 2 and 3 above.
The public will expect Central and local government to do everything in their power to get the return of the money. They will also expect very expensive Chief Executives, who are recruited to manage these type of things for Councillors and lay members of quangos, to take responsibility.
Some think Councils should now withdraw all their deposits from other banks just in case, as they are not protected by the Treasury in the way smaller depositors are protected, and place the money in short term government bonds. This would cut the return for Council taxpayers, and be damaging to the banking system as a whole. There needs to be a better way, agreed between central and local government urgently.