Talks over Icelandic bank deposits

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The emergency meeting with the Local Government Association comes as dozens of local authorities revealed they had deposited taxpayers' cash in the institutions.

They will urge Treasury ministers to give them the same guarantee offered on Wednesday to individual savers by Chancellor Alistair Darling that they will not lose out.

One authority alone - Kent County Council - has £50 million deposited in troubled Landsbanki and its UK subsidiary Heritable, as well as Glitnir Bank.

Dozens more, as well as Transport for London and the Metropolitan Police Authority, have assets in the banks, estimated by the Tories to be worth in excess of £1 billion.

A total of 37 authorities have so far said they have investments caught up in the collapse, investments branded a "disgrace" by campaigners.

Kent said its local services were not at risk but smaller authorities, with a larger proportion of their cash in the banks, faced potential cuts.

The LGA insisted councils had stuck to Whitehall rules encouraging them to get the best return and to invest their money across a number of financial institutions to spread risk. Councils took professional advice and were only allowed to lend it to banks with the top credit ratings, they pointed out.

However one local authority, Brighton and Hove City Council, said it suspended transactions with one Icelandic bank - Kaupthing Singer & Friedlander - about a year ago amid concerns about the country's banks expanding too rapidly.

There was no sign that any of the elected councillors responsible for approving the investments had taken the advice of the TaxPayers' Alliance pressure group and resigned.