By Tash Shifrin
26 June 2009
The Audit Commission has been forced to amend its report on local councils’ investments in Iceland to remove the term ‘negligent’, which it had applied to seven authorities.The climbdown follows the threat of legal action by the London Borough of Havering and Kent County Council. Both authorities have forcefully denied that they acted negligently.
In a statement, the watchdog also conceded that the seven authorities ‘should have had an opportunity to make representations before publication’ of the March 26 Risk and Return report.
The revised report, published on June 25, no longer labels any of the seven ‘negligent’, and the views of Havering, Kent and Redcar & Cleveland councils on their Icelandic investments have been included.
But the commission maintained its criticism of the seven authorities, which were highlighted because they made investments in Iceland after September 30 last year, when the watchdog argues it was ‘widely known’ that the Icelandic banks were at risk.
Commission chair Michael O’Higgins said: ‘Whether it was through negligence, carelessness or following an inappropriate policy, millions of pounds of public money was put at risk when it should not have been.’
Both Havering and Kent told Public Finance they were unhappy with the tone of the commission’s statement. Havering’s director of finance and commerce, Rita Greenwood, said: ‘I think they have climbed down but they’re trying to deflect it by criticism. They’re trying to justify something that’s unjustifiable. We’re still not happy – and we’ve made it clear to them.’
The watchdog’s retreat ‘proves the original report wasn’t properly researched or cleared for quality purposes’, she said, adding that the commission had admitted in a report on its own £10m investment that it was not aware of problems with the Icelandic banks until October 6.
John Simmonds, Kent’s incoming Cabinet member for finance, told PF the commission’s statement was ‘a magnificent exercise in self-justification’.
He accused the watchdog of coming back ‘for a second bite’, saying: ‘Continuous sniping doesn’t move things on.’
Audit Commission managing director of policy, research and studies Peter Wilkinson told Public Finance the ‘negligent’ tag had drawn ‘a disproportionate amount of attention because the two councils chose to initiate legal action’.
But it would have been a waste of public money to engage in a legal dispute, he added. ‘Had we realised how much attention it would attract and how councils who invested when they shouldn’t have done would react, we probably would not have used the word.’
