Conservative Councillors voice their concern over the Council’s Treasury Management Rules

Cllr Tom Rowe (Conservative, Rural North Ward) Conservative spokesman on Treasury Management, explained: “These are the rules about how the Council invests the surplus £30m of taxpayers’ money it holds in reserves.

The rules were introduced in 2008 after the Lib-Dem controlled Council unwisely invested £4m of taxpayers’ funds in an Icelandic Bank which subsequently failed."

Moody's, the credit-rating agency, had described Iceland's banks as "fragile". A study by Morgan Stanley concluded that Iceland's banks were 7.5 times more likely to default than their European counterparts. In July 2007, the International Monetary Fund published a gloomy report on Iceland warning about impenetrable ownership structures and murky lending practices. Analysts concurred that the Icelandic central bank was simply too small to support the debts incurred by its banking sector.

Despite these stark warnings, in August 2008, the Lib-Dem controlled Council still proceeded to invest £4m of Taxpayer funds in Icelandic Banks. All but £347k of the tax payers money was eventually recovered by 2011. But the lost interest was considerable, as was the cost of additional borrowing while the £4m was unreachable.

Cllr Rowe added “I see parallels with the Council's Icelandic bank fiasco. The Council is lending its spare cash to other UK Councils. Some of these are clearly not a good bet. In particular, it is a high risk to lend to those Councils that have issued a Section 114 Notice that they can no longer meet current or new financial commitments.

I demand that Taxpayer funds are properly protected by amending the Council's Treasury Management rules:

• to prohibit lending to any Council that is in Section 114 special measures, and
• to include in every loan agreement the requirement that, should the borrowing Council issue a Section 114 notice, it must immediately repay any loan from Colchester Council.

Conservatives pledge to properly protect the Taxpayers' funds held in reserves from unwise and risky investment.

2024-08-15