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local authorities and the Icelandic banks - 10/8/2008 3:42:36 PM

LadyEllen

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To my amazement today, it appears that our local authorities here in the UK - the ones that are always strapped for cash and have to increase the local taxes year on year by way over inflation just to meet statutory requirements- are standing to lose millions in the Icelandic banking crisis.

These are the same local authorities that dont have the funds to pay for salary increases to low paid public servants as inflation races ahead. The same ones that go about cutting this service or that service year on year for want of money to pay for it. Yet they had millions of pounds sitting in high interest deposit accounts in Iceland all this time.

And now they've lost it, they'll be looking to recoup it through raised local taxes.

Anyone have any thoughts on this?

E

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RE: local authorities and the Icelandic banks - 10/8/2008 3:44:35 PM

RCdc

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I'm just surprised that no one seemed to see it coming.

the.dark.

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RE: local authorities and the Icelandic banks - 10/8/2008 3:45:27 PM

kittinSol

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All I know is that I've been wanting to go to Iceland since before it became a cool destination for the Time Out crowd. Sorry, I know it's not much

.

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RE: local authorities and the Icelandic banks - 10/8/2008 7:25:42 PM

MadAxeman

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Most council financial departments have had to look for high gain investment, often without proper training or experience in varied markets. It's due to the squeeze from central government which has long held the view that they must break even, or get close enough to it to avoid capping. In my town which is considered well heeled, the refuse collection crews have been severely cut back, there are fewer of them and they operate at jogging speed. It's commonplace for your rubbish to remain uncollected if it's more than a yard away from their preferred pick up point. Recycling plants now have to make money rather than just benefit the community. God forfend what this might mean for some of our hospitals.

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RE: local authorities and the Icelandic banks - 10/8/2008 9:56:38 PM

kinkbound

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quote:

ORIGINAL: LadyEllen

To my amazement today, it appears that our local authorities here in the UK - the ones that are always strapped for cash and have to increase the local taxes year on year by way over inflation just to meet statutory requirements- are standing to lose millions in the Icelandic banking crisis.

These are the same local authorities that dont have the funds to pay for salary increases to low paid public servants as inflation races ahead. The same ones that go about cutting this service or that service year on year for want of money to pay for it. Yet they had millions of pounds sitting in high interest deposit accounts in Iceland all this time.

And now they've lost it, they'll be looking to recoup it through raised local taxes.

Anyone have any thoughts on this?

E

Borrow some Guillotines from your French neighbors.

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Post #: 5

RE: local authorities and the Icelandic banks - 10/9/2008 2:50:55 AM

meatcleaver

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quote:

ORIGINAL: kittinSol

All I know is that I've been wanting to go to Iceland since before it became a cool destination for the Time Out crowd. Sorry, I know it's not much .

I visited Iceland around 1979 and those long summer days do something to the native women there, in the nicest possible way. It was very expensive then though but worth every penny.

As for councils, I would never have invested in the country because its so small and the talent pool can't be all that big.

Actually the female talent pool was quite big from what I can remember.

I have a big cheesy grin every time I think of the place.

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RE: local authorities and the Icelandic banks - 10/9/2008 2:51:32 AM

Aneirin

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From what I saw on the News last night, people in the UK are not at all happy about this, firstly what Lady E. mentioned, there seeming to be money to play with in offshore accounts when they, that is the councils moan about being skint and cutting back essential services. And then our glorious leader wanting to bail out the Icelandic banks, with money that just seems to be coming from nowhere.

Now I am pretty suspicious of government, that is local and central, but now these revealations and I think of all the essential services that have been pared back that need'nt have and the people that have lost their jobs through lack of funding, the money that seems to be available to dabble in the markets, it is like to increase one's pot of gold, just bet on the horses, as gambling is gambling and they are gambling with our money.

What we can do about it, is probably nothing, although I suspect there are many who would like to withold their council tax.

Local or central, they are just the same, crooks through and through.

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RE: local authorities and the Icelandic banks - 10/9/2008 2:51:51 AM

tweedydaddy

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The local authorites concerned did not just do this off their own bat. This was no willy nilly scheme to hide money from the treasury by recklessly placing fortunes overseas. This was after lengthy consultations with highly qualified reckless pillocks.
Before anyone sues the Vikings for our danegeld back, we should sieze the assets of those advisers and their networks that ripped our collective elected plebs.
As a Patrician, I'm not much of a one for local democracy, but this stinks worse than an Icelandic cod to me. I've never forgiven those arrogant bloody lager drinkers for the fishing war. "walks off muttering" let's ban abba...

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Post #: 8

RE: local authorities and the Icelandic banks - 10/9/2008 3:34:18 AM

Aneirin

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You mentioned two countries in that which are not Iceland, Danes as in Dangeld, literally Danish gold, and reference to Abba who are Swedish, as far as I am aware, the problem lies with Iceland, a country which is largely descended from Norwegian settlers. Whether Iceland is a Scandinavian country I don't really know, it's position in the middle of the North Atlantic, kind of denies that, but both Danmark and Sweden are not of the same ilk as Iceland, so perhaps it is good not to blame them until further information comes about that they are involved, if they are involved.

I have always wanted to go to Iceland, the place calls, but alas I could never afford it.

Whatever the status of Icelandic banks, it is wise to remember, it was our idiot governments that blew our money there, without it seems our knowledge or input.

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RE: local authorities and the Icelandic banks - 10/9/2008 3:40:23 AM

LadyEllen

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quote:

ORIGINAL: MadAxeman

Most council financial departments have had to look for high gain investment, often without proper training or experience in varied markets. It's due to the squeeze from central government which has long held the view that they must break even, or get close enough to it to avoid capping.

This is true from what I have heard so far - but I also heard that the Post Office offers the same high returns on 12 month fixed term accounts (run as one would expect, by another foreign bank). The Icelandic accounts however, so I have heard, were instant access, offering a far more flexible means of putting the money away and being able to draw on it as needed.

What is puzzling me though is if these councils have so much money to invest then not only why (as per my OP) but also how come there is no suitable vehicle available in the UK from one of any of the slew of banks we're about to spend so much money on?

Or, how come the councils couldnt invest the money in one or several of the many local credit unions that are running and springing up all over the place? Whilst it could be argued that the sums involved are too large for the customer bases of these credit unions - the customer bases are determined to great extent by the funds managed by the credit union...... This way, the council would get a return - and the money would go towards helping the local people whom the council is meant to support and represent rather than towards a new fully loaded Volvo or Saab for the CEO of some Icelandic bank.

E

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RE: local authorities and the Icelandic banks - 10/9/2008 4:01:31 AM

Aneirin

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What is it now, the LA's are looking to get bailed out by the government, much like the banks are being bailed out, they have to, or we will all get it.

But government bailing out banks, would'nt it be better if the government bailed out the people, cancelled their debts to the banks and let the banks get on with it, do what they are good at, trying to make money from questionable sources. If the people became mortgage and debt free, that would free up more cash to the high street.

This government having controlling shares in banks, I can't help thinking Mr Brown is just after our money, if he can't get it by taxes, then he will by our savings and repayments.

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RE: local authorities and the Icelandic banks - 10/9/2008 5:18:58 AM

RCdc

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quote:

ORIGINAL: LadyEllen
This is true from what I have heard so far - but I also heard that the Post Office offers the same high returns on 12 month fixed term accounts (run as one would expect, by another foreign bank). The Icelandic accounts however, so I have heard, were instant access, offering a far more flexible means of putting the money away and being able to draw on it as needed.

What is puzzling me though is if these councils have so much money to invest then not only why (as per my OP) but also how come there is no suitable vehicle available in the UK from one of any of the slew of banks we're about to spend so much money on?

Or, how come the councils couldnt invest the money in one or several of the many local credit unions that are running and springing up all over the place? Whilst it could be argued that the sums involved are too large for the customer bases of these credit unions - the customer bases are determined to great extent by the funds managed by the credit union...... This way, the council would get a return - and the money would go towards helping the local people whom the council is meant to support and represent rather than towards a new fully loaded Volvo or Saab for the CEO of some Icelandic bank.

E

Well, I believe it's all to do with the mess over that other bank - I cannot remember its name - BIAC, or BAIC or something like that(my bank name knowledge is pretty poor) but the councils, who aren't great about investing took advice from the government who warned them not to put all their eggs in one basket again basically. So they issued monies in various institutions, post office being one of them depending on the council. It's not as simple as putting your money in a british held bank or credit union, but trying to play it safe by spreading a percentage all over. Which, if a bank collapsed or there were internal issues would help, but in the current climate that's not going to help because the effects are across the board. Which is why they are approaching the government now because it was their advice that messed them up.

the.dark.

< Message edited by Darcyandthedark -- 10/9/2008 5:19:23 AM >

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RE: local authorities and the Icelandic banks - 10/9/2008 5:28:40 AM

LadyEllen

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Thanks for the update D&D - there were rumours yesterday that the councils were acting on Treasury advice and so there was a moral case to answer, but it wasnt confirmed at that stage.

I think it was BCCI you were thinking of? I think it was some Scottish authority that got into trouble with that one?

I'd like to see an end to this speculation with taxpayers' money. Some other way must be found - and here's a crazy one; how about the councils use their money to build council houses that will forever after attract rental payments into the coffers of the councils - reducing the burden of the council tax and providing much needed homes? And all the time, the councils have real assets against which, should the need arise, they can borrow.

E

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RE: local authorities and the Icelandic banks - 10/9/2008 5:39:17 AM

MadAxeman

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There has been much muttering about PM Brown leaning on the Icelandic gov to cough up. One suspects depositors will not lose their money, although what will his promises to them cost the rest of us.
The interesting thing about the OP is what this reveals about Local Authorities (LA). I don't think they sit on a pile of gold, counting away with glazed eyes. An almost universal truth is that life expands to fill the money. After chasing high gain returns with their reserves (perhaps only to maintain the financial status quo) there would still only be the same amount of fluid cash to spend on services, infrastructure and staff.
Unions have long invested their pension money offshore and in foreign markets. If these monies evaporated there would be a fnancial timebomb ticking away as the population ages with fewer private assets to pay for it.

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RE: local authorities and the Icelandic banks - 10/9/2008 5:41:47 AM

RCdc

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quote:

ORIGINAL: LadyEllen

Thanks for the update D&D - there were rumours yesterday that the councils were acting on Treasury advice and so there was a moral case to answer, but it wasnt confirmed at that stage.

I think it was BCCI you were thinking of? I think it was some Scottish authority that got into trouble with that one?

I'd like to see an end to this speculation with taxpayers' money. Some other way must be found - and here's a crazy one; how about the councils use their money to build council houses that will forever after attract rental payments into the coffers of the councils - reducing the burden of the council tax and providing much needed homes? And all the time, the councils have real assets against which, should the need arise, they can borrow.

E

That's the one - I know it had B and C's in it. I am a bit rubbish with names.

I am torn on this issue though. I really don't know who to 'blame' or who to feel bad for. The councils for being rubbish with investments and trying to blame the advice givers, or the givers of advice(government). The councils now want the government to step up and cover their backsides - but if it wasn't for the fact that it's taxpayers monies - I don't believe I would agree. If it was any other business or investment company or individual we would be say - ah well, you took the risk, you pay the consequence and don't expect a bail out. The big factor is that it's my money and yours. But I don't know if the government can be blamed for this one?

the.dark.

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RE: local authorities and the Icelandic banks - 10/9/2008 6:00:00 AM

TNstepsout

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Well let's see, on a very small scale, homeowner associations keep a portion of the assessments in a reserve account to pay for future large repairs such as refinishing a pool, or tennis court or rebuilding a retaining wall or replanting trees that died. They can't use this money for every day expenses because if they did, when it came time to make the repairs they wouldn't have the money. In HOA's they could assess each person their portion of the repair but that's a big unexpected expense for most people and tends to make them mad.

I imagine they had this money in Iceland for similar reasons, although on a much larger scale. I could be wrong, but it's a guess. If that's the case, it would work to the benefit of the taxpayers because if they had a significant return on their deposits, it would reduce the amount out of the budget for those major repairs.

This is actually one of the really bad side effects of this economic meltdown. A lot of money invested in these complicated mortgaged backed investments did not come from individuals or even corporations. It came from cities, states, municipalities, even nations. That's why there has been such a huge attempt to bail out this mess.

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RE: local authorities and the Icelandic banks - 10/9/2008 9:56:01 AM

LadyEllen

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One way or another we the taxpayers will be stumping up for this if its lost.

Whether its a Treasury bail out or additional local taxes we will be replacing any funds lost.

And on that cheery note, our lot here have potentially lost £9 million apparently. You can always rely on the Tories for sound financial governance.

E

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RE: local authorities and the Icelandic banks - 10/10/2008 4:49:00 AM

TNstepsout

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Yes, in more ways than one. From what I'm hearing, Iceland is blaming the UK for the failure of their banking system because the UK froze a bunch of assets. I don't know details, nor quite understand them, but that's what they are alleging. They also were unable to find help from any of the countries they appealed to except Russia. Something about that just seems ominous to me.

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RE: local authorities and the Icelandic banks - 10/10/2008 5:05:11 AM

LadyEllen

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As I understand it, the UK froze all Icelandic assets here because the Icelandic government declined to fulfil its liabilities in compensating depositors. I would guess the idea is to either force their hand to fulfil those liabilities or to have control of realisable assets with which to provide compensation. Their banking system collapsed before the assets were frozen, and I think the problem the Icelanders possibly have is that they dont actually have anything to provide compensation with.

What will be interesting is that a few English football teams are owned by Icelanders I believe - Stoke City being one of them from what I remember, who are currently playing in the Premiership. Presumably then, for the moment the UK government has control over these teams.

But yes, its worrying for two reasons that when they asked for help the Icelanders received interest only from Russia. First there is the important strategic position of Iceland and its possible claims on Arctic waters. More immediately ominous is that no one else took any interest - suggesting that no one actually has the capacity to help, indicating that the EU and US are in deeper doodoo than admitted to date - so deep that they can do nothing to prevent Iceland falling under Russian influence.

But we mustnt either forget in this that the Icelandic people are going to suffer a great deal too. They import so much of what they need, and overnight their currency is worth less - making the cost of their vital imports much higher and so driving their standard of living way down. We mustnt blame the Icelanders in general for what has happened, unless we also wish to blame the Americans in general for the subprime debacle.

Iceland got itself into a problem because its banking system relied on interbank lending. For Iceland, this dried up three years ago when other banks wouldnt lend any more to its banks. So Iceland went on the hunt for private funds and did well in the UK offering high interest returns, which is why the UK now has a problem with Iceland. Whats interesting about this is, that the credit agencies and other advisory companies had the Icelandic banks at triple A rating until last week, so private investors had no idea what was coming until it was too late. How that stacks up against the report that other banks round the world stopped interbank lending to Icelandic banks three years ago I'm not sure - but it seems to me that if another bank wont fund your bank then maybe there would be reasons for that, which were not then translated into the information provided to private investors?

E

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RE: local authorities and the Icelandic banks - 10/10/2008 5:16:23 AM

LadyEllen

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Just to add, its not just local councils (including mine; average £500-00 per household for my area) standing to lose out here - there are several police forces involved too.

And worst of all in the light of Darling's refusal to provide compensation to anyone but personal investors, several charities, including one which provides hospice care to dying children and their families. This makes the whole thing despicable in my view.

It was reported last night that declared interests from non-personal investors added up to just over one billion pounds - and the word is that the actual figure including those not declared yet could be 3-4 billion pounds from taxpayers monies and charitable donations invested in Icelandic banks.

One wonders what the next thing will be - because day by day, week by week, this just seems to get worse as more is uncovered on the wonders of globalisation.

E

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