COMMUNITIES AND LOCAL
GOVERNMENT News Release (042) issued by COI News Distribution
Service. 5 March 2009
The Government has
acted to protect the public from potential service cuts or council
tax increases that could result from local authority investments
in Icelandic banks while efforts continue to recover the money.
Local Government Minister John Healey has laid regulations before
Parliament that enable authorities to postpone any possible
budgetary impact of this until 2010-11.
Without this help, they would have to make immediate provision
for possible losses in their revenue budgets - with potentially
serious impacts on council tax or services.
New statistics published today show that as at the end of last
year, 125 local authorities in England had outstanding investments
of around £923.2million in Icelandic banks
John Healey said:
"Following the failure of Icelandic banks last year the
Government - with the Local Government Association - acted
immediately to ensure no local authority faced serious short term
difficulty as a result. We continue to work closely with the banks
and Icelandic authorities to help local authorities and other
creditors recover their money.
"This money isn't lost but it is at risk so under
normal financial rules this risk would need to be taken into
account in their budgets. I was concerned about the possible, and
potentially unnecessary, effect this could have on services and
council tax. That's why I am taking this exceptional step
that gives authorities some breathing space that should allow them
to be clearer what sums, if any, are still at risk. Meanwhile the
Government will continue its efforts to ensure that investors
recover as much as possible from the banks."
The regulations come into force on 31 March 2009 and apply immediately.
Notes to Editors
The regulations are the Local Authorities (Capital Finance and
Accounting) (England) (Amendment) Regulations 2009 [S.I. No. 321]
made under the Local Government Act 2003.
The effect is for the time being to neutralise the revenue
charges for the losses required by accounting practice. However,
an authority taking advantage of that relief will be required to
make the charges in 2010-11. By then it should be clearer to the
authority how much will be recovered.
The new regulations can be found at:
http://www.opsi.gov.uk/si/si2009/uksi_20090321_en_1
The CLG informal commentary on the regulations can be found at:
http://www.local.communities.gov.uk/finance/capital/amreg.htm
Guidance by CIPFA (the Chartered Institute of Public Finance and
Accountancy): http://www.cipfa.org.uk/pt/pt_details_l.cfm?news_id=59274
http://www.cipfa.org.uk/pt/download/laap79.pdf
Today's updated survey of English local authority
investments in Icelandic banks can be found at http://www.local.communities.gov.uk/finance/stats/iceland.htm
Media Enquiries: 020 7944 3042
News Releases: http://www.communities.gov.uk/newsroom