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Colchester: £4m gets frozen
12:47pm Thursday 9th October 2008
Comments (31)A troubled Icelandic bank is holding £4 million of Colchester Council’s money.
Borough finance chiefs were attracted by high interest rates to make the deposit at the start of September – before the crisis facing Landsbanki was known.
Iceland’s second-biggest bank has since been nationalised, with Icelandic ministers looking to rescue the country’s financial system.
Colchester Council’s resources portfolio-holder Paul Smith, a former banker, said the £4 million was less than one per cent of the council’s net worth.
But he added: “I don’t like losing 40p if I can help it. The situation is very unclear at the moment.
“When the money was placed with them on September 1 or 2, it fully met our investment guidelines but that is not the case today.
“It is not due for repayment for a couple of months, hopefully by then things will be resolved.”
In the UK, more than £500 million of savings invested in Landsbanki subsidiary Heritable Bank have been taken over by Reading-based bank ING Direct.
Meanwhile, the Treasury has agreed to guarantee individuals’ savings after the company’s internet arm Icesave defaulted and saw its UK assets frozen.
The Local Government Association has called for deposits made by councils also to be protected.
Chancellor Alistair Darling said: “I know the position of local authorities – I think they’re in a slightly different position in that they are more of an informed investor.”
- More in today's Gazette
Your Say YourGazette
guyfawkes999, England says...
2:02pm Thu 9 Oct 08
Is it the Chief Executive or the Councillors?
Do we need an elected Lord Mayor who will take full responsibility for running the town?
Who would make a good Lord Mayor for Colchester?
The town is on its knees it needs someone to sort it out.
By the way why did Colchester Council invest £4,000,000 in a tiny Icelandic Bank?
What services will be cut if the Council can't get the money back?
Should someone be sacked for this **** up?
Poacher, Clacton says...
2:18pm Thu 9 Oct 08
It would appear that this money isn't for the day to day services provided, its surplus cash.
The question you should be asking is how when councils cut back services and raise council taxes year on year yet have an estimated £50 million sitting their idling away.
Its sickening the money might have been been lost BUT if that hadn't happened then this "mugging" of tax payers might never have come to light.
Boris, Colchester says...
2:31pm Thu 9 Oct 08
If Iceland was paying higher rates of interest, it was for a reason, that the rating agencies considered it a rather dodgy investment.
CBC could have invested their spare cash in Zimbabwe at 200 million per cent annual interest, so we should be grateful they didn't do that.
Local authorities should be made to invest their spare cash in UK government securities which might pay a lower rate of interest but at least they can get the money back whenever they need it.
Empy, Colchester says...
2:38pm Thu 9 Oct 08
guyfawkes999, England says...
2:41pm Thu 9 Oct 08
But who is running the Council?
Who is in overall responsibility?
Everyone is passing the buck.
SimonW, Colchester says...
3:11pm Thu 9 Oct 08
Like any large organisation, councils have to put their money somewhere. They deposit their income in banks with money not required to fund day-to-day services and operations put into a range of investments. Central funding is tight and pressure to keep down council tax bills is acute so councils have been under instruction from the Treasury to maximise returns from their own money. This has led them to banks, such as those in Iceland, which offered highly competitive rates of interest. Just like any other individual would.
Where would you like the council to have kept their money, in a safe in the Town Hall?
t coudl have happened to any bank, remember is was only 2 weeks ago that Lloyds TSB was saved after the government set up the takeover by HBOS
ivan burit, jaywick says...
3:30pm Thu 9 Oct 08
1) as our community desperatly needs a cash injection, and we are told "its not there"
IS IT....
2) on the telly a troubled ex something or other tells us all =
Go to iceland....
All the troubled councils, societies and instituions should have known better then really.
(ok, the second is not serious enough is it, but you have to laugh at the shear incompetents of the money men / women who control MY money and yours...
How can it be the councils, if we give it to them, or is it "easy come - easy go"..
Empy, Colchester says...
4:01pm Thu 9 Oct 08
Fox Hat, Colchester says...
4:54pm Thu 9 Oct 08
Poacher wrote:Some councils now apparently need the money to pay staff wages, and this is quite a serious issue given that the brown enevlopes have also stopped coming in.
If you had been following the news Guy Fawkes, you would have heard that some 60 councils around the country plus some Police Authorities are in the same boat. It would appear that this money isn't for the day to day services provided, its surplus cash. The question you should be asking is how when councils cut back services and raise council taxes year on year yet have an estimated £50 million sitting their idling away. Its sickening the money might have been been lost BUT if that hadn't happened then this "mugging" of tax payers might never have come to light.
guyfawkes999, England says...
5:17pm Thu 9 Oct 08
But who is running the Council?
Who is in overall responsibility?
No one seems to know on this site given the lack of come-back.
There will be severe cuts in public services as a result of this Icelandic bank loss + the VAF bailout + the Colchester Borough Homes bailout + the losses being incurred on the Community Stadium as a result of the low attendences at the matches.
So who is going to be sacked and who is going to resign.
Goonerboy, Colchester says...
5:43pm Thu 9 Oct 08
It would be interesting to know how many of the councillors/officals who made these investment decisions had the confidence to invest their personal savings in such institutions.
Feisty CBC, Colchester says...
6:22pm Thu 9 Oct 08
Disley Titchbender, Colchester says...
6:32pm Thu 9 Oct 08
I suppose that this is something
they will look to the tax payers to replace if lost.
Just a bit fed up having to put our hands in our pockets all the time for other peoples mistakes and misfortune!
Jerry61, Colchester says...
6:59pm Thu 9 Oct 08
Apparently the £4m is less than 1% of the councils net worth. Well that's ok then.
Apparently the situation is vey unclear at the moment. No it's not, it's crystal clear.
Apparently the money was placed with the Icelandic bank on the 1st OR 2nd September. Dear God man i'm sure i'd know what date i put £4m of someone elses money into a foreign bank!!
Apparently the money's not due to be repaid for a couple of months, and HOPEFULLY things will be resolved by then. So if all else fails keep your fingers crossed eh!?
Chancellor Alistair Darling says concils are a different proposition to private investors as councils are 'more informed investors'. Well, obviously not it seems. Maybe this would explain why Mr.Smith is a FORMER banker!!
Still, at least the roof is going on the VAF, so they've got that bit right!
Oh hang on a minute..............
.!!
Mr Ed, Wivenhoe says...
8:03pm Thu 9 Oct 08
Mr Ed, Wivenhoe says...
8:03pm Thu 9 Oct 08
Council Tax Payer, says...
8:06pm Thu 9 Oct 08
From the 'Financial Mail' March 16th 2008, Five and a half months before Cllr. Smith decided to invest our £4 million...
'Credit insurance for debts at Iceland's biggest bank, Landsbanki, is priced at 610 points while that for Kaupthing is priced at a hair-raising 856. Given that these two have taken billions in UK retail deposits, it may be a sobering thought for savers to consider where they are putting their cash. These banks are now seen as the most unsafe in the developed world.'
When asked at last night's Council Meeting where the £4m was, Cllr. Paul Smith laughed and said "somewhere in Reykjavik I suppose"!
With the Government currently refusing to protect Local Authority investments in Icelandic Banks this is no laughing matter Cllr. Smith. It is quite astonishing that you can be so flippantly dismissive of Colchester Tax Payers concerns!
Cliff, Colchester says...
8:51pm Thu 9 Oct 08
ivan burit, jaywick says...
9:44pm Thu 9 Oct 08
es.gov.uk/communitie
s/communityempowerme
nt/communitiesincont
rol/
It does what it says on the box...
Read it.....lol
Andy Hamilton, Lexden says...
12:35am Fri 10 Oct 08
"When the money was placed with them on September 1 or 2, it fully met our investment guidelines but that is not the case today.
“It is not due for repayment for a couple of months, hopefully by then things will be resolved.”
You really have to ask why this well paid individual ignored all the financial information in the press before September. There is limited protection for Iceland savers - about £16,000. On the news the UK government spokesman refused to announce any practical help to the financially incontinent councils.
The Colchester Council accounts department seem to have no supervision by anyone. At the recent full Council meeting I criticised the lack of public accountability. Not one councillor spoke in defence of the staff.
The councillors failed to supervise the accounts department but it is the taxpayer who will have to pay for the losses.
Hopefully Paul Smith will stop his silly comments that the Visual Arts Facility is progressing. In the real world the VAF is effectively mothballed and the Cultural quarter development abandoned.
Cliff, Colchester says...
12:39am Fri 10 Oct 08
guyfawkes999, England says...
9:17am Fri 10 Oct 08
Who is the person in overall charge of running Colchester?
What are the elected councillors doing on behalf of the taxpayer?
There is no doubt that there will be severe cuts in public services as a result of:
1) Icelandic bank loss
2) VAF bailout
3) Colchester Borough Homes bailout
4) Losses being incurred on the Community Stadium as a result of the low attendences at the matches.
Who is going to be sacked and who is going to resign?
The present system of running Colchester is just not good enough.
Many of the present deadwood councillors and executive officers at Colchester Borough Council have to resign.
Andy Hamilton, Lexden says...
10:44am Fri 10 Oct 08
He might wish to note that the Auditor is already under investigation by the Audit Commission regarding his incorrect statements about the VAF in his 2006/07 inspection letter.
The arrogant accounts department will be subject to a complaint to the relevant government department because they illegally ignored requests for accounts information during the public access period. I showed how invoices were improperly handled re charging to the correct cost centre. The public does not realise how they have been mislead. Cabinet had a month to start an investigation and they sat on their well padded posteriors.
This latest financial loss is a disaster for the budget. Contrary to the council spokesmen this council is already heavily in debt. Actual net debt is about £30million.
It is shameful that the council does not apologise for their mishandling of taxpayers' money. I would ask for those in charge of the accounts department to be sacked without compensation. However I guess they will quietly leave with a large payout.
guyfawkes999, England says...
11:29am Fri 10 Oct 08
Cliff, Colchester says...
12:11am Sat 11 Oct 08
Andy Hamilton, Lexden says...
8:35pm Sat 11 Oct 08
I at least make the effort to research and present the facts at Council meetings. "Cliff" may be happy to see £millions lost by the Council but most people would like to see taxpayers' money actually spent on this town.
The 2007/08 accounts showed how the Council net debt had risen by £3.5million and that ignored the liabilities for the VAF. This year has been a financial disaster with reduced government support and unexpected new expenditure.
The failure of CBH maintenance contract is the biggest to date with £1million going to compensate the outgoing contractor. That still leaves £millions to finish off the remaining council housing.
The £10million extra cost to finish the VAF is just not achievable. When the accounts department have also lost £4million in Iceland it makes this years budget impossible to fix.
Somethings will have to be cut back after May. The easy bits have already been done. For example churchyard maintenance is already at a minimum. Realistically the only way of saving money will be to defer capital expenditure on some council pet projects.
guyfawkes999, England says...
3:03pm Sun 12 Oct 08
Andy Hamilton love him or loathe him, has set out his case and challenged you to debate the points. The best you can do is call him eccentric. Is that all you have.
Cliff, Colchester says...
12:36am Mon 13 Oct 08
That a good enough debate for you?
And just because you call your self Andy Hamilton doesn't mean that's your name - do you think we're all dumb.
Andy Hamilton, Lexden says...
9:12pm Mon 13 Oct 08
Everything I write is based on the facts. For example the £1million compensation to the Inspace contractor was detailed in the 2007/08 accounts so there is no secret about this.
The £10million to finish the VAF is based on Council statements. THEIR estimate to weatherproof the exterior has made the present total £14million. THEIR estimate do complete the entire building including the interior is £24million. So it is about £10million to come which the Council does not have.
Actually the estimates are somewhat optimistic because of the construction problems that will make it a nightmare to finish. Please note the expected total cost has doubled from the original figure.
I realise a properly run organisation would not redirect services money onto capital projects and vica versa. However this Council seems to lack any respect for normal accounting policies.
The Council auditor is under investigation and the Council accounts will be subject to a complaint to the relevant government body. Council debt is exploding and yet Councillor Hunt was quoted on tinights Anglia TV that the VAF would be completed regardless.
Vineyard gate development has been abandoned already by the developer. The derelict VAF has put a spoke in the plans for the Cultural centre. This Council seems to be ignoring the economic meltdown all around them. The only question is how much taxpayers' money will be wasted on the VAF before financial reality dawns.
Cliff, Colchester says...
12:17am Wed 15 Oct 08
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The REAL Norm, Colchester says...
1:39pm Thu 9 Oct 08