Downing Street Says » Icelandic Banks

Asked repeatedly if there had been any more clarity from Iceland regarding British depositors, the PMS said that there was not much to add to what was said at this morning s lobby; it was best to speak to the Treasury. There was a meeting taking place between the Treasury, the Department for Communities and Local Government (DCLG) and the Local Government Association (LGA), so it was possible that either the Treasury or DCLG would be able to say more following that meeting.

Asked how worried the Prime Minister was that in the long run, there was a strong incentive for local authorities to remove their money from banks and invest it in other ways, the PMS said that we needed to do more to get to the bottom of the situation in relation to this particular Icelandic bank. We had had difficulty getting the information we needed from the Icelandic authorities and we were in the process of establishing the full facts.

Asked if the Government would welcome talks with Scottish local authorities, the PMS replied that he was sure we would. The Treasury and DCLG would be able to update people on the situation.

Asked how much money from local authorities had been invested in Icelandic banks, the PMS said he did not have that information to hand, but the Treasury were in the process of establishing that in discussion with the LGA.

Put that some local authorities would not be able to pay staff salaries if they could not get access to the funds invested in Icelandic banks, the PMS said he had quoted the chairman of the LGA this morning, someone people would have thought was an authoritative and well-informed source on local government matters. The PMS said that he was sure there were lots of different views and opinions expressed by people who worked in local government, but the chairman of the LGA had issued a press release saying that councils were confident that they would have sufficient funds to tide them over for a considerable period of time and they did not expect it to have any impact on local services.

Asked to respond to the Conservatives claim that local government investment in Icelandic banks directly stemmed from guidance issued by John Prescott in 2004, the PMS said that his understanding of the situation was that the guidance issued by the Treasury made it clear that councils should act in a responsible way when investing council taxpayers money. Put that the suggestion was that Mr Prescott advised local authorities to go for investments where they would get a higher return for their money, the PMS said he was not aware that that was the case at all. The only guidance he had seen was the Treasury guidance that suggested that they act in a prudent way.

Asked how soon a decision would be made on the investments, the PMS said the Government would need to have a discussion with the LGA and that was taking place at the moment. The first recourse for any such funds for councils would be the assets of Landesbank itself and that was why the Government took decisive action yesterday to freeze the assets of Landesbank in the UK.

Asked if he was aware of any Treasury guidance stating that investment in Icelandic banks was not a good idea, the PMS said he was not aware of all the detail of the Treasury guidance so people would need to check with them

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» Thursday, October 9, 2008

Icelandic Banks

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