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Internal investigation into Icelandic investment

PUBLISHED: 13:56 09 April 2009 | UPDATED: 16:05 07 September 2010

AN internal investigation at Barnet Council has found the decision to invest £27.4million in the now collapsed Icelandic banks was a breach of approved policy. A cross-party investigation found that the council s deposits contravened the council s treas

AN internal investigation at Barnet Council has found the decision to invest £27.4million in the now collapsed Icelandic banks "was a breach of approved policy."

A cross-party investigation found that the council's deposits contravened the council's treasury policies, finance chiefs were "over reliant on credit ratings" and failed to have adequate controls, monitoring, record keeping and internal review mechanisms.

The damning report comes as a government Select Committee exploring the Icelandic banking collapse concluded if administrators cannot return the money lost, local authorities should not be reimbursed.

The report's summary states: "It would seem perverse to rewa-rd authorities who failed to protect their investment, with yet more money from the taxpayer."

The Treasury will now consider the report.

Liberal democrats on Barnet Council have criticised the hand-ling of the Icelandic crisis by the Conservatives - particularly by council leader Mike Freer, who previously worked for a bank.

Leader of the party and Child's Hill councillor Jack Cohen said: "We have said all along the council should not have invested in Icelandic Banks. This is the clearest indicator yet that the current administration is not up to the job."

Treasury manager Patrick Towey resigned from Barnet Council earlier this month over the crisis.

A council spokesman said the council was "very positive" their funds invested in the collapsed banks would be returned by administrators.

Haringey and Westminster Council were two other authorities who had investments in Iceland. The government will not bail them out and return their funds of £37m and £17m respectively if administrators fail to reimburse them.


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