31 October 2008
By Tash Shifrin
At least one local authority looks set to raise money from its capital assets to meet the financial hole left by the collapse of Iceland's banks.
Local government minister John Healey said on October 27 that he would 'consider an application for capitalisation' from Uttlesford District Council, Essex, which had deposited £2.2m in Iceland's banks.
Adrian Webb, director of central services at Uttlesford, said the council would talk to the Department for Communities and Local Government about capitalisation to cover £135,000 of unpaid interest from its Landsbanki account, and the estimated £65,000 it would have received in interest had its £2.2m been reinvested for the rest of 2008/09. But he added: 'The council has insufficient capital funds available to capitalise the principal, and will be consulting further with the DCLG, especially over possible options around a business rate holiday.'
Uttlesford was one of three district councils targeted by the government for a visit by a 'rapid response team' of financial experts – although none of the three had requested assistance. The other two were Wyre Forest and Tamworth.
In a parliamentary statement Healey confirmed that none of the councils had 'short-term cashflow problems' that would affect key services, payment of staff or ability to meet contractual commitments.
Uttlesford's capitalisation application would be considered 'as part of the normal process', while Wyre Forest would continue to receive expert financial and management support paid for by the government.
Teams of financial experts were also at work in four other English authorities, to provide 'support requested in confidence', Healey said.
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