Local authorities seek government aid and demand inquiry into faulty investment advice

Officials from UK local authorities will meet with ministers later today to discuss aid for 116 councils affected by the near-collapse of the Icelandic banks.

The Local Government Association (LGA) is also demanding an inquiry into why Icelandic banks continued to be rated highly by credit rating agencies just days before their collapse.

Hazel Blears
Blears announced a rapid response unit to help councils

Hazel Blears, secretary of state for communities and local government, announced yesterday that a rapid response unit had been created to help councils in difficulties following the failures of Icelandic banks.

Established jointly by the government, the LGA and the Improvement and Development Agency, the unit will deploy financial experts to local authorities facing severe short-term financial problems.

The UK Treasury has said it is working with the Icelandic government to ensure that depositors get their money back as soon as possible

Chancellor Alistair Darling froze the UK assets of Landsbanki last week in an attempt to ensure that local authorities and other creditors were treated fairly. An HM Treasury delegation was sent to Iceland on Friday.

The LGA is finalising an urgent analysis of the effects of the situation on individual local authorities, but has said that no councils are in danger of cutting services.

Councils that invested in Icelandic banks include Kent County Council, which had £50m invested, Nottingham City Council with £42m, Norfolk County Council with £32.5m, and Dorset County Council with £28.1m.