Councils slammed over deposits risk

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Critics branded the investments an "absolute disgrace" and said those responsible should consider their positions.

One authority - Kent County Council - has £50 million deposited in Icelandic banks while more than 20 others are thought to have exposure running into millions of pounds.

Barnet Council in north London is thought to have in the region of £27 million deposited and Westminster Council said it had £17 million with Icelandic institutions. Transport for London said it has a £40 million deposit with Kaupthing Singer & Friedlander, which has been placed into administration.

Mark Wallace, campaign director at the TaxPayers' Alliance, said: "People will be shocked that the councils had this money stashed away in the first place. Every year we hear that councils don't have enough money and need to raise taxes but it seems they have had sufficient excess tax to salt tens of millions of pounds away.

"The fact that they have invested this money and seem to have lost it is even more shocking and is sadly yet another reminder of the poor financial management in local councils. In short, they should not have stashed this money in the first place and they simply weren't equipped to try to be clever in the markets with it."

He continued: "It's an absolute disgrace. If the councils can't get their money back, the people who took these excesses should seriously consider their positions as councillors."

Edward Welsh, of the Local Government Association (LGA), insisted councils acted along "prudent lines" by spreading their money across several financial institutions at home and abroad. But he admitted the money was now "at risk".

Mr Welsh told BBC Breakfast: "Councils are large employers, they have large wage bills to pay off, they collect large amounts of money in council tax. The reason why this money has been put in these banks is to try to reduce risk by putting their money in as many banks as possible."

He said of the money: "We don't know it's lost, we know it's at risk. That's why we are speaking to the Treasury, that's why we want to find out what we can do to try and get that money back."