Council investment 'negligent'

Bridgnorth District Council said its officers had kept within the rules

A Shropshire council which put £1m in Icelandic banks is among seven in England accused of "negligence" for investing days before they went bust.

Bridgnorth District Council and six other councils put £33m into the banks days before their collapse on 7 October 2008, the Audit Commission said.

The banks' credit ratings had been downgraded on 30 September, it said.

But Bridgnorth District Council denied the claims and said its officers had acted "within their delegated powers".

The commission said most councils had "heeded warnings" about the declining credit worthiness of Icelandic banks during 2008 and taken action accordingly.

'Rolled over'

However, the spending watchdog said some had ignored the risks while seven had behaved "negligently".

It said they continued to deposit money after 30 September, when the credit ratings of Glitnir and Landsbanki were downgraded to "adequate" - below that deemed acceptable under guidance to town halls.

These included the South Yorkshire Pensions Authority who deposited £10m and Kent County Council who invested £8.3m, it said.

But Bridgnorth District Council said its original investment of £1m was placed in April 2008 and "rolled over" on 2 October for a further 31 days.

It said until 8 October, the Landsbank had a short-term credit rating of P1, the highest level for such a deposit.

'Acted reasonably'

The council said after the banks collapsed, its independent auditors' investigation confirmed the investment had been "appropriately made".

It added the commission gave no indication there was "anything untoward" when it passed on its evidence.

Council leader Elizabeth Yeomans said: "I am very concerned that the Audit Commission has criticised the council in a national report, when its own auditors have satisfied themselves that we acted reasonably."

The fate of the £954m deposited by councils and other public bodies in Icelandic banks remains uncertain.

Bridgnorth District Council and five other councils will cease to exist when Shropshire's new unitary authority comes into force on 1 April.

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