Icelandic update

Before the Icelandic banks collapsed Wiltshire Council 'invested' £12million at interest rates which were literally too good to be true. However thanks to the work of the Local Government Association much of the money lost by Wiltshire and other foolish councils is set to be returned. The county put £9m into Heritable Bank and £3m into Landsbanki.

In December 2011 WC received almost a third of the money owed to it from Landsbanki when the first payment of around £952,000 was made. Latest indications are that the council will eventually receive 98% of its deposit, though this may take until 2016. Another snag is that when the money gets sent to Wiltshire it arrives as a mixture of dodgy currencies including Euros and Icelandic kroner.

The equivalent of just over £6m has been received from Heritable, with more expected this year. The final total is likely to be around 95% repayment - a direct loss of £300,000 without allowing for costs.

However even the best case scenario represents a substantially higher real terms loss to the council tax payers of Wiltshire, as the capital tied up in Iceland since the council sunk the money in the doomed bank just before it went bust has of course not been generating any interest.

On Friday, October 28 2011 the Supreme Court in Iceland ordered that the deposits placed by the test case UK wholesale depositors, including local authorities, have priority status in the winding-up of Landsbanki. It means this group of investors, including WC, will be repaid first in the winding-up process.

Details are contained in the WC 'cabinet' report at http://cms.wiltshire.gov.uk/ieListDocuments.aspx?CId=141&MId=6106&Ver=4

(See reports pack p73)