Frozen assets

Wednesday, 27 January 2010

Bankrupt Iceland bankers ditch payback offer – Barnet Council stands to lose…£9million

By Nick Griffin

A MASSIVE chunk of the £27million of Barnet taxpayers’ cash which was tied up in two doomed Icelandic banks is now likely to be lost.

Throughout last year Barnet Council finance chiefs made repeated assurances that the cash lying frozen in Icelandic accounts would be recovered, despite the country’s spectacular banking collapse in October 2008.

But it emerged this week that as much as £9.3m of the £12.4m invested with failed bank Glitnir will probably be lost.

The development comes after representatives from the bank suddenly reneged on an earlier deal, downgrading the authority’s deposits from priority to “general unsecured claims”.

The U-turn means that the council may now be in line for just 25 to 30 per cent of its money.

A deal to repay interest lost up until the point Glitnir folded has also been scrapped.

Lawyers are to begin urgent talks with the bank’s winding-up board later this month.

If unsuccessful, local authorities will have no option but to embark on a protracted legal battle though the Icelandic courts at further cost to the public purse.

Another £15m remains tied up in a second bank, Landsbanki, of which Barnet currently expects to recover about 85 per cent.

Barnet Liberal Democrat leader Jack Cohen said: “We’ve been warning all along that this money would be lost but we were told there was nothing to worry about. Surely Landsbanki will see what Glitnir is doing and do the same. The whole situation is a mess.”

Labour leader Alison Moore said: “Despite all the assurances given by [former council leader] Mike Freer, the council is not going to get anywhere near all the money back. It’s a disaster.”

Barnet treasury manager Patrick Towey announced his shock resignation in March just before it was made public that neither of the banks were on an approved list.

A later report revealed that 89 per cent of taxpayers’ cash, deposited with banks between 2006 and 2008, breached strict guidelines governing where it could be invested.

Mr Freer, who resigned his post late last year in a bid to become an MP, denied he was culpable, maintaining that he had been there to set policy, not “micro-manage” what officers were doing.

Council leader Lynne Hillan said: “What Glitnir has done came out of the blue. It’s a blow but the Local Government Association has legal advisers and we’re told we have a good case.

“The money was a very small part of what we had invested. You can’t have millions sitting in your current account, and who could have predicted what happened? Even the Audit Commission had money invested. This has no effect on council tax because it’s nothing to do with the revenue budget.”

Email: nick.griffin@nlhnews.co.uk

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