Stroud's £3m in Icelandic banks

I've not been well the last couple of days - add to that my internet connection has not let me receive any emails - well they are coming through today - some 600 emails from the week so please bear with me - I will try and get to replying....but wanted to add something on the latest banking news....

Cartoon: borrowed from Kipper Williams of The Guardian - see more here

Stroud District Council, like other authorities had deposits with Icelandic banks. In our case it was £3million deposited in Glitnir Bank (one of the affected banks). In terms of other Icelandic investments: Glos County had £12m, Cheltenham £11m, Cotswold £2m and Glos City £2m. Because of the large number of councils who are in this situation, the Local Government Association is pressing the Government to protect the investments of local authorities in Icelandic banks.

The Citizen asked Gordon Brown what he planned to do when he made a surprise visit to the Cheltenham Lit Festival yesterday. Gordon tells us he is putting pressure on teh Icelandic authorities...we'll see...but here is a view from Green party Economics spokesperson Molly Scott Cato:

The fiasco over the loss of council tax receipts from the people of Stroud in Icelandic banks illustrates the importance of investing ethically and keeping money local. Back in November 2006 Green councillor Martin Whiteside put down an amendment calling for Stroud District Council reserves to be invested ethically. There was cross-party support for this motion amongst the opposition parties but it was rejected by the Tory administration. Their rapacious approach to the economy has now resulted in this mess - so much for their claim to be the party that will reduce our council tax bills. My own view is that our money should be invested for the benefit of our community. This could be in local mutuals such as the Stroud and Swindon building society, or in the new community asset fund being set up by Stroud Common Wealth. In the tough economic times that lie ahead we would do well to remember the central principle of a mutual economy: that by supporting each other we can create a brighter future.

See more re Martin's amendment here and my blog comment here when the Tories rejected the move.

Lewisham Council had £40m invested in Icelandic Banks, but moved its assets about 6 months ago following a post-Northern Rock review of where to stash its cash. I will be asking why we didn't do the same.

Another aspect to this is that it makes considering such a massive expenditure re the canal very much more risky and worrying? Also for Glos City Council I wonder if the council still fancies taking on the liablity of an airport expansion??

Indeed we should be asking why any Chancellor should shovel money into the banks where it will serve no purpose but paying off their debts? Where is attention on the real economy? As Molly Scott Cato says elsewhere on her blog: "The banks’ lack of concern for the real economy is shown in their profiteering from the difference between the bank rate and the rates of interest they charge to businesses. This is now the only way banks still have to leverage money out of the economy and their use of it will rapidly increase the number of businesses going bankrupt. They are using the same tactics on mortgage-payers, which will cause an increase in foreclosures and damage the housing market yet again. Far from being the saviours, the banks are shown again to be the destroyers of the economy. Darling’s plan should focus on the small businesses that provide 99% of the employment in this country. He should establish an ‘Economy Saving Bank’ (literally!) and use taxpayers money through that route to be channelled into business lending. Does this begin to seem like political management of the economy? Might I be the first to mention that unspoken phrase ‘credit controls’? If money is in short supply it seems only sensible to ration it. Those who need to borrow can justify their right to the shrinking pot on the basis of their usefulness to society. My guess would be that in any democratic system the banks would come rather low on this list at present."

The Conservatives have sadly not come up with a plan either - indeed there response seems to be to marginalise democracy even further. It's what Naomi Klein and others call 'disaster capitalism' - seizing on an emergency as an excuse to drive through a hard-right ideological agenda. Here is Green party leader Caroline Lucas' comment:

"The Tories want to outsource oversight of government finances to a quango they call the Office of Budget Responsibility. But we already have an Office of Budget Responsibility. It's called Parliament. We don't need another quango, filled with the same corporate bosses that got us into this mess, with a few Tory donors and ultra-right think-tank wonks for good measure. We need real democratic control of the economy, with power returned from multinationals to parliament and, most importantly, to ordinary people. "

The Tories want to outsource the handling of failed banks, too. When a bank has to be nationalised, it should be dealt with for the benefit of ordinary savers and borrowers, but George Osbourne wants banks handed over to the Bank of England for another dose of the insular City thinking that caused the problem in the first place.

"Under a Green New Deal, banks that failed would be restructured into more, smaller companies, so that any problems they have in the future can be contained without putting the whole economy at risk. High-street banking would be separated from high finance to improve the security of people's savings and mortgages. We would restore some of our lost building societies, which added much-needed stability to the market. We would get finance, and the economy as a whole, working for people rather than distant corporations.

"The Tories want to cut public investment just at the time we need it most. Their attitude is 'you're on your own'. A Green New Deal means government doing its job: investing in keeping our economy healthy and building a sustainable economy for the future. By borrowing from the people through local bonds, government can create a secure investment for savers. That would allow us to revamp our public transport, energy supplies and housing, generating jobs, revitalising money flows, loosening ties to unreliable oil markets and cutting carbon emissions."