Diary of a Sutton Councillor

Credit Crunch Hits Sutton

Sutton has found itself amongst the number of local authorities and regional bodies affected by the collapse of the Icelandic bank Landsbanki. We find that we had £5.5m invested in the UK subsidiary of the bank – funds that are currently frozen.


We are fortunate in Sutton that our prudent policy of spreading our investment portfolio across a number of institutions means that we are only affected by the Icelandic bank collapse to a relatively small amount.


We have received assurances from the chief executive that there will be no effect on services or need to impact on future years’ council tax levels.


The council’s treasury management is regularly reviewed by the Audit Committee as a matter of course. This committee was newly established by the Liberal Democrat leadership in June 2007 and we requested that it be headed up by a member of the opposition group to ensure rigorous scrutiny of the Council’s financial arrangements. I remember speaking strongly in favour of setting up a separate audit committee as it is considered best practice in the private business sector.


Conservative councillor Terry Faulds agreed to take on the chairmanship of this committee and I also sat on it when it considered our policy of short term investments back in December 2007.


The Council’s policy is to only invest in banks with a high credit rating. Councillors have been advised that when the deposit was placed with the UK Subsidiary of Landsbanki it still had a high credit rating. That rating was only revised on 1st October this year.


However as a matter of good practice and to see if there are any lessons that can be learned for the future Cllr. Drage the Executive Member for Resources has requested that there is a joint review of the matter by the Audit Committee and the Scrutiny Overview Committee. As a member of the Scrutiny Overview Committee I will be involved in that review.


October 17, 2008 - Posted by | Information


  1. Hi Jayne

    I’m working even later than normal and thought I would have a quick run around some local Blogs and saw this recent entry from you.

    The problems poised in relation to by deposits in the Icelandic banks are a concern to all of us in Sutton. I know your colleague John Drage has been scathing of the Libdem Parliamentary Treasury spokesman, Vince Cable, who has described councils who deposited funds into Icelandic Banks and their subsidiaries as “unbelievably silly”.

    I agree with John and wanted to ask if you supported his view.

    Kind regards


    Comment by Cllr Barry Russell | October 18, 2008 | Reply

  2. Dear Barry

    You sound apologetic for having been caught reading my blog. You are very welcome to visit my blogsite and I am sure that it is not something you need to feel guilty about!

    Along with many other people across the political spectrum I have great admiration and respect for Vince Cable. He has shown both prescience and sound, practical judgement particularly at this time of financial difficulty. However I admit that I have been confused by the mixed messages that have been attributed to Mr Cable in respect of the effect of the credit crisis on councils. He was the first to bring the potential effect on councils of the collapse of the Icelandic bank to the attention of the Government and to demand help for those councils affected. On the other hand he is also reported as saying that those councils and public bodies affected have acted unwisely. I have not read Vince Cable’s comments in their original context so I can only make suppositions. However I suspect that Mr Cable is guilty only of making a generalisation, and, as with any generalisation, there will be exceptions. As I have said above, Sutton’s policy of not putting all its eggs in one basket has saved us from being in a worse financial position. However quite rightly we need to look and make sure that lessons are learned from this experience which is why Cllr. Drage has requested a cross-party review.

    Comment by jaynemccoy | October 20, 2008 | Reply

  3. Hi Barry

    I have just noticed that you have referred to Vince Cable as the shadow treasury spokesperson, when in fact Lord Oakeshott is the person in this role. Vince Cable is the shadow chancellor. Understandable as both are reported as having commented unfavourably about councils’ investment in Icelandic banks.

    Comment by jaynemccoy | October 24, 2008 | Reply

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