Taxpayers could be out of pocket by £3m
TAXPAYERS in Cheltenham could find themselves almost £3 million out of pocket.
That is the potential loss to Chelt- enham Borough Council following the collapse of the Icelandic banks.
At the moment the borough has £11 million tied up in three stricken banks – £3 million with Kaupthing, Singer & Friedlander, £3 million with Glitner Bank and £5 million with Landsbanki.
Although a report by the Chartered Institute of Public Finance and Accountancy suggests Cheltenham is likely to be able to recover most of that money, the council's officers have calculated the authority might still be nearly £3 million down on what it could have expected.
A report by chief finance officer Mark Sheldon, to the full council meeting on Monday night, broke down the amounts which may be lost.
He said: "The total principal and interest potentially lost was estimated at the end of March to be £1,791,537."
He added the future interest expected to be earned on the frozen investments over their lifetime, based upon a rate of just more than five per cent, was £1,211,480.
The two sums added together is £2,907,473.
However, Mr Sheldon said the prediction may not be as bleak as the future interest was not factored into the authority's budget and some interest on the £1,791,537 may still be recouped.
He felt there was a possibility that £508,797 interest could still come in from investments to the end of March. Also a windfall receipt from central government of £624,000 for the reduced rate of VAT announced this year could reduce the total amount lost to £658,740.
He suggested that could be covered by money in the general council's general reserve fund, reducing that account to £1.1 million.
The outgoing Cabinet member for finance Coun John Rawson said: "I have made it my objective ever since this crisis hit us to try and deal with it without impacting on council tax or service levels.
"We could cover our losses without raising council tax or cutting services and while still retaining £1.1 million in the general fund balances. This is what I belive we should aim to do, at least until we receive better information about our rate of recovery."
Coun Rawson added that an alternative would be to spread the loss of capital across 20 years but that was undesirable as it would increase the council's budget gap for many years.
He said: "We should deal with this problem now, and not pass it on to the next generation of councillors and council tax payers."
3 Comments
by Terry Heath, cheltenham
Wednesday, July 01 2009, 10:33PM
“The 1996 fiasco will still be costing us around £400,000 each year until 2030 to clear the debts to the European banks.
The Icelandic banks have made no firm commitments and the total involved is nearly £1 Billion from local authorities and much more spread across hospitals, charities and universities who had not learned the basic lesson that if it looks too good to be true then it probably is.
Some people never learn and squeal in protest about a lack of warnings when called to account.
Totally untrue but if people are so naieve and misguided, they should not be in control of public monies.
Meanwhile, the Icelandic government is clearly not persuing the fraud investigations with all due diligence accompanied by rumours of family ties being involved.
Iceland¿s government is claiming that the UK Treasury¿s use of
anti-terrorist legislation to freeze the assets of Landsbanki unermined confidence in Icelands bank; a move that triggered a diplomatic storm between Britain and Iceland.
If and when a form of payment is arranged, UK creditors will certainly not be granted any favous by Iceland.”
by MWD, Cheltenham
Wednesday, July 01 2009, 9:45AM
“I am not so sure that our councillors are asking the 'right' questions here? It does seem that there are many confusing statements whereby not all taxpayers would be able to understand.
However, they are being told what to expect, but with no guarantees.
We so often see that ouncil officialsy either lash out when under pressure or come up with some interim report that does not have much reliabilty attached to it.
This 'prediction' is very much like the the risky investment itself.
In the broader picture we are still throwing money down the drain over the 1996, £22.5 million fiasco. Does anybody know how much that is costing us to date? The Central Governemnt wouldn't bail CBC out then so what is so different in this case.”
by David, Cheltenham
Wednesday, July 01 2009, 9:10AM
“No-one ever says what proportion of CBC's money was placed with the Icelandic banks. I could accept that say 25% was placed in high interest accounts,bur surely any more was risky , paticularly as they were not protected as EC banks are. Any comment from the Council?”