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Darling's 'duty to repay councils'
Paul Waugh, Deputy Political Editor03.02.09
CHANCELLOR Alistair Darling fuelled the run on Iceland's banks and has a "moral" obligation to help repay the £1billlion lost by British councils as a result, MPs were told today.
Town hall chiefs told the Treasury Select Committee that Mr Darling should pay up because he personally exacerbated the banking crisis when he stated last year that the Reykjavik government had warned it may not honour its duties to British investors.
Richard Kemp, deputy chairman of the Local Government Association (LGA), said that the Treasury should stop dragging its heels over a compensation deal with councils and should bail them out.
Mr Kemp's evidence came as depostiors in one Icelandic subsidiary also accused Mr Darling of misleading the international community about Iceland's intentions. The Kaupthing Singer and Friedlander Isle of Man Action Group (KSFIOM) claimed that there was no evidence of any warning of possible default from Reykjavik, a claim backed up by Iceland's ambassador to the UK.
More than 120 councils in the UK, including several in London, are faced with potential losses after the collapse of Icelandic banks in which they had invested. The LGA points out that the cash was invested properly, on the advice of credit ratings agencies, and council taxpayers face higher bills without compensation from the Government.
Individual British investors in Icelandic banks that have collapsed are getting full compensation, but ministers are reluctant to follow suit for town halls as they believe they had access to early warnings of the impending crisis. Some councils did get their money out before the collapse.
Mr Kemp said that Mr Darling's comments last October proved that town halls had a "moral right" to recompense by Whitehall. "We should have our money back," he told MPs. Councils want the Treasury to recapitalise them over several years to spread the burden of the losses.
Mr Darling acted swiftly to use anti-terror legislation to seize assets of some Icelandic subsidiaries last year, claiming that the Icelandic government had refused to meet its obligations to the UK. But when asked about his remarks, KSFIOM said today that "to say that was inflammatory would be putting it mildly".
The Treasury Select Committee was also told that the Financial Services Authority (FSA) had not heeded warnings in 2005 about the problems of Icelandic bank Kaupthing taking over British Singer & Friedlander Group .
Former chief executive Tony Shearer said he raised his concerns with before Kaupthing Singer & Friedlander was taken into administration last October.
Mr Shearer said the FSA "rushed through" approval of the deal in 2005 despite his and his colleagues' concerns.
"My short experience of Kaupthing and its management lead me to believe that they were not fit and proper people to control a UK bank," he said.
"This view was shared by most, if not all, of the other members of the Singer & Friedlander board."
He added: "I believe that the FSA had sufficient information about Kaupthing that they should never have approved the change of control, and if they were to do so they should have made extensive further inquiries."
In a statement, the FSA rejected Mr Shearer's account of events in 2005.
Reader views (8)
What about the commission factors in handling the deposits
and associatedd transactions, what ammounts where involved and whom where the persons that handled amd/or benefited ? These %'s = large sums of money !
Transparency please !
- The Disciple, Kent, UK.
There is something not quite right in this whole debacle and I hope the British Government deals with this situation justly for everyone concerned .
- Gale Shaheed, Newark
No way! The councils took the risk, they should pay the piper - and not by cutting services or raising council taxes, but by making the idiots who made the decision to put council tax payers' money into airy fairy dodgy investments pay. No more perks, no more London weighting, take a big salary cut (because all of you are vastly overpaid for doing much of nothing anyway), or simply quit and let a child do your job, because a child could do it better!
- Mel, London
The idiots who invested this money were not paid to be moronic herd animals but to form their own judgements. There are plenty of institutions which did not invest in Iceland. It should have been self evident from the interest rates alone and the feeble size of the country ehind them that this was risky. These intellectual minnows who have crawled the greasy pole to the top of our local government without the correct skill-sets should admit that they were not up to the job, that they made mistakes, and let themselves and the public down. They should then get out of the way for people who can look after public money properly without pointing fingers at other people.
- Rock R. Pheller, Rockall
Everything this chancellor touches seems to be going wrong. He has learnt his trade from previuos chancellor - Crash Gordon...
- Jacqueline, Hampstead, London
I assume it is also Mr. Darlings responsibility to stop holding out on HM Treasury's block on repatriation of 550 million GBP to IOM that he locked up in KSF UK by these actions. There are several thousand individual KSF IOM depositors (not investors) who have lost their life savings and in many cases their livelihood by these actions. When can we expect our cheques Mr. Darling?
- Nr8209, Rome, GA, USA
The councils should not have had this sort of money available to invest. It shows how much the Councils overcharge on Council Tax, if they get this money back they should return some to their ratepayers, and apologise after all it was still the ratepayers money.
- Jim Alan, Lake District
What on earth were UK public authorities and services doing putting money in foreign banks (with no government guarantee, not even a foreign one). I'd suggest that whether or not there is a bail-out, the law must be changed, so that this can never happen again. UK taxpayers' money should be held in UK-regulated banks or better still, by the UK treasury.
- Nigel, London
