Since 2008, when the collapse of Iceland’s banking system resulted in £950million of cash deposited by 123 UK local authorities being trapped in a complicated labyrinth of insolvency, I have been a strong critic of those councils, including Scottish Borders Council, whose officers gambled with taxpayers’ money.
In SBC’s case the potential loss when the banks went under was £10million. It seemed most, if not all, councillors were blissfully unaware that vast sums of our money were being transferred on a daily basis into the coffers of Landsbanki and other Icelandic financial institutions in a bid to earn a fast buck. The fact that these unstable banks carried a financial health warning did not seem to matter.
I repeatedly called on politicians and Audit Scotland to investigate this high-risk policy – without success – and warned that the consequences could be dire if the hundreds of millions of pounds of public money were not clawed back from the land of ice and fire.
But following a recent successful action in the Icelandic Supreme Court, fronted by lawyers acting for the Local Government Association (LGA), it seems my fears and predictions were unfounded. So it is time for me to apologise and eat ample helpings of humble pie.
In the words of Stephen Jones, the LGA’s director of finance and resources: “One of the LGA’s greatest achievements of last year was securing millions of pounds for member councils with deposits in the failed Icelandic banks.”
In a feature recently posted on the LGA website an ecstatic Mr Jones describes the outcome of the court action as “a fantastic result”. But he concedes the result – the likely return of £470million – has been achieved at a price.
And guess who the biggest winners are. Mr Jones writes: “Overall, the court cases cost £4million, which is an awful lot of money to spend on lawyers – but well worth it if you are going to get back £470 million.”
I’m afraid I beg to differ, given that the massive legal bill will fall on council taxpayers, plus the fact the £470million should not have been in jeopardy (or in Iceland) in the first place. If you divide £4million by 123 it works out at £32,520, so will that be the proportion of the fat legal fee to be met by SBC? I would suggest that each of the 25 members of the council’s ruling administration should chip in £1,300 to compensate for their gross negligence.
Then Mr Jones seems to suggest there may be other issues yet to be overcome before our money is back in safe (?) hands.
For instance, there is about £20million resting on decisions of other technical issues in the insolvencies which may require a return to court. Oh dear. He also explains that the Icelandic banks do not have all their money in pounds sterling, but in a mix of currencies, including Icelandic kronur. It is not possible to convert kronur into other currencies without the approval of the central bank of Iceland. Oops.
It should now be possible to come up with a final reckoning in this inglorious chapter in the history of local government.
We have been told that at the end of the day – possibly in 2018 – some 98 per cent of the £950million COULD be returned. That leaves two per cent or £19million gone forever. A trifling amount of cash hardly worth bothering about, wouldn’t you say? Add in the £4million for the solicitors and the £20million still in dispute, and you end up with a grand total deficit of £43million – excluding that problem with the kronurs.
If that is the LGA’s idea of a fantastic result then I’m afraid they must be living on a different planet. But I’m happy to apologise for doubting them just in case this was a victory.