Norfolk County Council and Breckland Council have significant deposits with three of the stricken banks but both authorities have moved to assure taxpayers that front-line services will continue as normal despite mounting financial uncertainty.

The county council saw £32.5 million of its funds – including several millions from West Norfolk council and income tax payers – frozen this week following the banking collapse.

'Pressure on MPs to lobby government'

And Breckland Council saw £12 million of deposits exposed to the problems due to its investments with the banks Landsbanki, Glitner and Kaupthing, Singer and Friedlander.

A rallying call has now been made for Norfolk MPs to pressure the Government into providing the same level of support to councils that it has already given to private individuals and privately-owned banks.

North West Norfolk MP Henry Bellingham raised the matter during a debate in the House of Commons on the current financial crisis yesterday.

Speaking afterwards, he told the Lynn News: "Ever since Northern Rock crashed the Government has known that Icelandic banks have been overheating and edging towards crisis.

"I am staggered that the Treasury has not told local authorities to keep spreading the risk and avoid the Icelandic banks.

"I do not blame Norfolk County Council but I find it mind blowing that the Treasury has not put councils on red alert.

"It would be quite wrong if Norfolk council tax-payers and service users should suffer as a result."

South West Norfolk MP Christopher Fraser added: "Both Breckland Council and Norfolk County Council have money tied up in Icelandic banks – money they can ill-afford to have exposed at a time when they are already finding it difficult to maintain services, while at the same time make ends meet.

"I understand these investments followed Government guidelines and it is the Chancellor's duty to reassure our councils that he is monitoring the situation carefully and will do all he can to protect the interests of tax-payers."

Following this week's developments all council money invested in the banks has been frozen and authorities now face an anxious wait to see if they can access those funds over the coming weeks.

At any one time, the county council has around £300 million invested in around 30 high credit-rated banks and institutions, in accordance with the Government's strict guidance for local authority investments and professional codes of practice.

These investments benefit council tax-payers to the tune of £15 million a year.

Norfolk County Council leader Cllr Daniel Cox said: "Although these accounts are now currently frozen, I should stress this does not mean depositors will not get their money back in the future, nor does it directly affect the day-to-day running of the authority.

"We are actively pursuing the long-term implications of the Icelandic Government's intervention both through the Local Government Association (LGA) and Norfolk MPs."

It is believed that at least 20 councils in the UK have money tied up with the troubled banks, but both West Norfolk Council and North Norfolk Council have escaped any financial problems as their investments are directed elsewhere.

The LGA, which represents more than 400 councils in England and Wales, is also calling for Government intervention to ensure local authority assets are protected.

Chairman Margaret Eaton said: "While this may affect some councils financially, we do not expect it to have any impact on local services.
"Prudent financial management means that councils put their money into a diverse range of banks to make sure that any risk is spread to minimise the impact of problems in the financial markets."