No doubt following George Osborne’s question to Alistair Darling yesterday, the media are picking up the exposure of local councils to the crisis in the Icelandic banks, and the failure of the Treasury to extend the guarantee offered to retail depositors to wholesale monies. The Heritable Bank, in particular, had made a big play for public authority deposits in recent years. As a cabinet member for resources, I do find it incredible that, just as some individuals seem not to have heeded the lessons from Northern Rock and still held their life savings in one bank, some councils are exposed to such an extent to the collapse of just one bank – however good the institutions credit rating was when the deposits were made.
Thankfully in my own council of Bromley, our exposure is minimal, and our cash reserves are spread across more than two dozen institutions. Those reserves are generating over £6m in income which is helping to keep our council tax the lowest in Outer London.
