(2) what assessment has been made of the effect on local authority budgets of lower rates of return as a result of local authorities placing money in very low-risk deposits following the Icelandic banking crisis.
HM Treasury is continuing to work closely with the Icelandic Authorities to ensure fair treatment for all UK depositors and creditors. The Local Government Association are co-ordinating activity on behalf of local authorities, and local authorities are representing themselves at creditors meetings.
Under the Local Government Act 2003, local authorities are responsible for their own investment decisions, and we have not made an assessment of the financial effect on local authorities of the loss of interest from Icelandic investments, or of lower rates of return from their investments. The Department’s guidance on local government investments is available at:
The first-ever three-year settlement has given authorities the flexibility and stability they need to manage their budgets effectively.