COUNCIL chiefs have moved £5million into a Government safe-haven because of mistrust in the banking system, the Evening News can reveal.
Two sums – one of £3 million and one of £2 million – were placed into the central government’s Debt Management Office (DMO) on October 15 and 22 respectively.
Martin Pedley, Scarborough Council’s asset and risk manager, said: “The deposits with th
e Debt Management Office were placed as a short-term measure with a safe-haven while the turmoil in the banking industry following the Icelandic crisis settled.
“The DMO benefits from the UK Government’s AAA sovereign rating.”
The DMO will continue to hold the money until at least November 15.
The local authority also had, as of October 28, investments of around £20 million in 17 building societies and banks – including £1 million in the Skipton, which last week merged with Scarborough Building Society.
Council leader Tom Fox said the reason that Scarborough was not among the 123 local authorities which had £919.6 million invested in failed Icelandic banks or their UK subsidiaries was prudence, not chance.
He said: “This was not fortuitous but a result of our improved financial management package.”
Cllr Fox added that the authority had identified Icelandic banks as potentially risky investments as long ago as February 25.
David Chambers, the authority’s portfolio holder for finance, said: “I am pleased to advise that this council is not one of the 123 authorities with more than £900 million invested with the Icelandic banks, or their UK subsidiary.
“Investments are managed in accordance with the council’s treasury policy, which is approved by members on an annual basis as part of the overall financial strategy, and is reviewed regularly by officers.
“The Icelandic banks did not meet the standard required by this council to warrant investments being placed with them. All of our investments are made in UK banks and building societies which are regulated by the Financial Services Authority. We are aware of our responsibilities in managing taxpayers’ money and are very careful both in which organisations we invest with and how much we invest.”
But Cllr Fox also warned that there could be hard times ahead.
“Conditions have impacted on council operations,” he said. “We need to exercise prudence and control to achieve delivery of our long term aims.”
He added that, although the council did have a “strong financial platform”, it would be affected by the looming recession as anticipated receipts may not be achieved and it was faced with inflationary pressures such as increases in oil prices and rising utility bills.
David Chambers told a meeting of the council: “We are living in hard times. Our investments range over 30 plus financial institutions – to the best of my knowledge when we came into this meeting they were all solvent – I hope they are when we leave.”
l What do you think? Email us: letters@scarboroughevening news.co.uk
Write to: Evening News, Aberdeen Walk, Scarborough, Y011 1BB.
The full article contains 506 words and appears in Scarborough Evening News newspaper.
