£1m of taxpayers' money down the drain

Adam Hewitt • Published 13 May 2009 11:00 0 Comments

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COUNCIL finance chiefs have been blasted for losing taxpayers" money in failing Icelandic banks - and almost dropping £2m in Northern Rock.

Wokingham Borough Council should be able to claw back £4m of the £5m invested in Landsbanki and Heritable, but its cross-party finance scrutiny panel has delved deep into what went wrong.

It reports that the council 'lost money in the Icelandic banks as a direct result of a combination of a lack of professional expertise and advice and not reacting to the warning signals, such as the information available in the national press and the near loss of £2m of the Council"s money in Northern Rock'.

The report reveals that from December 2006 to September 2007, Wokingham invested £14m in Northern Rock, including £1m just a week before the failing building society had to go cap in hand to the Bank of England. Even councillors never knew how close they came to losing £2m, which was only saved by the Government"s pledge to guarantee deposits.

The five-strong finance panel"s four Tory members, including interim chairwoman Cllr UllaKarin Clark, and Lib Dem Cllr Stephen Conway, will present their findings to the council"s overview and scrutiny management committee tonight (Wednesday).

The report blames both council staff and politicians, saying the 'dominating political influence' was the 'overriding objective' of keeping council tax down by keeping the rate of return on investments up.

The panel makes 14 wide-ranging recommendations, including prioritising investment security over potential returns, bringing in experts to handle big investments, giving non-technical explanations to councillors overseeing finance, and replacing investment consultants Butlers with two new advisory firms.

Opposition Lib Dem leader Prue Bray said the panel"s good work 'unfortunately amounts to shutting the stable door after the horse has bolted'.

She added: 'Around £1m may be lost - when the Tories are scraping around for savings by closing public toilets and removing dog bins, I can"t help thinking they should have paid a bit more attention to the much bigger sums they were handing over to the Icelandic banks.'

Council spokesman David Allen stressed the Audit Commission found no evidence of negligence and that the council takes the potential loss of public money very seriously.

He added: 'Since the onset of the financial problems, the council has further tightened its policy. For example it has increased the credit rating threshold to AA, and only invests in countries with the highest credit ratings.'

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