MILLIONS of pounds of Lancaster City Council taxpayers' money was invested in crisis-hit Icelandic banks - it has been revealed.
Chief Executive Mark Cullinan said around £6million of the Council's current portfolio is invested in three banks in Iceland, although he did not expect the Council would suffer financial difficulties.
Mr Cullinan said at the time of making the i
nvestments, the banks concerned were reputable institutions with high credit ratings.
The three banks - Kaupthing, Landsbanki and Glitnir - were all taken over by the Government of Iceland this week to safeguard the banking system as the country struggled to cope with the global economic crisis.
Lancashire County Council also has £10million tied up in Icelandic banks. Out of a total of £550million deposited in these banks by local authorities, Kent County Council has invested the heaviest - a total of £50million.
Mr Cullinan said Lancaster City Council currently has £24million spread across a number of financial institutions.
"The amount invested can vary daily, given that the Council can reasonably expect between £200 to £250million passing through its bank accounts in any one year," he said.
"The Council uses the investment income generated to help fund its annual budget in providing services.
"These investments (in Icelandic banks) are not due to mature until 2009 and so, in the short term, the council does not face any financial difficulties or expect any impact on service delivery.
"We are monitoring the situation very closely and will be working with other councils and the Local Government Association (LGA) to seek protection for our investments and prevent any loss to council taxpayers.
"Although all the institutions the council has invested in are rigorously scrutinised prior to being chosen, given the current unprecedented crisis in the global banking market, interim measures have now been put into place to give even greater protection to our cash balances.
"These measures include keeping any future investments with highly rated institutions based in the UK or Ireland, where Government has now given guarantees for any such investments made."
On Thursday Iceland suspended all trading on its stock exchange amidst the growing financial crisis.
Council leaders were set to meet ministers on Thursday to push their case that funds - from more than 70 authorities - must be guaranteed.
The Treasury has said councils must be treated "fairly", but had so far declined to guarantee the money.
But the Local Government Association insisted frontline council services were not at risk despite the crisis.
Even so, BBC local government correspondent John Andrew said there was growing anger among local authorities, which said they had followed Treasury advice by investing surplus money in a way that would deliver the highest return for taxpayers.
Prime Minister Gordon Brown has said legal action will be taken over Iceland's failure to guarantee compensation for UK customers in its banks.
And Icelandic Prime Minister Geir Haarde said his government was working to repair relations with Britain amid the crisis.
