Just how safe is our £375 million?
Councils in Leicestershire and Rutland have more than £375 million invested in banks and building societies in Britain and across Europe.
The local authorities said, despite the financial turmoil across the world, taxpayers' money is as safe as it can be.
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Leicestershire County Council has by far the largest amount invested, with £187 million in 16 banks and building societies.
Leicester City Council has £80 million invested, while each of the district councils has up to £30 million each invested in accounts.
A policy of ignoring high-risk deals has been adopted to ensure deposits are secure, councils said.
Experts believe some banks and building societies were offering very high interest rates because they had cashflow problems.
Financial advisers are being used to gauge the risk of investments.
The money invested by councils is held to gain interest. It is money they intend to spend.
Last year, the city council made more than £3 million in interest and the county council received £8 million on top of what it deposited.
Steve Charlesworth, head of financial strategy and development at Leicester City Council, said: "The idea that all these councils are sitting on loads of money is true, but it is not really what people might think it is.
"We have always taken a fairly cautious approach to investments. It has always been safety first.
"There are organisations that are highly rated and those that are low rated. We would go for the highly rated. Banks have high interest rates for a reason – normally, a high rate is a high risk.
"We do want to do the best for the council tax payers, but not if it is going to be at a high risk."
Most of the councils' money is with high street banks and building societies, including institutions such as HBOS, which were bailed out by the Government this week.
Rutland County Council and Charnwood Borough Council have £1 million each in failed Icelandic banks, and are not guaranteed their money back.
Money had been invested in the Icelandic market because it was recommended as safe, with high interest rates.
Councillor David Parsons, leader of Leicestershire County Council, said: "Our prudent investment policy has stood us in good stead.
"The credit rating of the Icelandic banks did not meet our strict criteria."
Leicestershire's district councils have more than £70 million invested, with North West Leicestershire District Council investing £15 million.
Councillor Matthew Blain, deputy leader of North West Leicestershire District Council, said: "There is a lot of uncertainty about financial markets at the moment. As a council, we will continue to keep people's money as safe as we can."
Oadby and Wigston Borough Council failed to respond to the Mercury's request and Blaby District Council did not produce a full list of information.
Panicos Demetriades, professor of financial economics at the University of Leicester, said councils should focus on Government-backed banks or investments.
He said: "Our councils seem to be doing the right thing by investing in Government bonds, and high street and Irish banks. These are all protected by Government and therefore the investments would be safe."
LEICESTERSHIRE COUNTY COUNCIL: £187 million invested; £8 million interest received; Overall budget £850 million.
LEICESTER CITY COUNCIL: The city council has £16 million invested with banking institutions and £64 million in Government bonds; £3 million-plus interest received; Overall budget £800 million.
RUTLAND COUNTY COUNCIL: £23 million invested; £870,000 received in interest; Overall annual budget £94 million.
CHARNWOOD BOROUGH COUNCIL: £29.7 million invested; £15m invested by Investec fund managers; £1.6 million in interest; Overall annual budget £80 million.
HARBOROUGH DISTRICT COUNCIL: £2.8million with two Irish banks, £9.4 million in five building societies; £761,000 interest received; Failed to produce its gross budget.
HINCKLEY AND BOSWORTH BOROUGH COUNCIL: £19.7 million invested; Interest received £1.046 million; Annual budget £40 million.
MELTON BOROUGH COUNCIL: £9.5 million invested; Interest received £427,707; Annual budget is £24.5 million.
NORTH WEST LEICS DISTRICT: £15 million invested; £463,000 interest; Gross budget of £49.5 million.
4 Comments
by A W, NWLD
Wednesday, October 15 2008, 2:02PM
“I am amazed at the amount of money that councils have invested and how much interest they have earned. I am particularly amazed by the figures published for LCC. After my son died in 2004 as a result of RTA in which he was struck by a vehicle as he walked beside a road with no pedestrian footways or lighting.I was told that while there was a wide agreement that the Facilities for pedestrians and cyclists were needed on this stretch of carrigeway they were unaffordable. These figures suggest otherwise,. It seems obvious to me that the council are far more interested in stashing cash and making profit than paying for REAL improvements that will SAVE LIVES, IMPROVE PEOPLES WELL BEING AND ARE IN LINE WITH THEIR WALKING AND CYCLING,SUSTAINABLE TRANSPORT,AND REDUCING THE IMPACT OF TRANSPORT ON THE ENVIRONMENT POLICIES.The cost of lighting and creating a Footpath was estimated at 150 to 200, Thousand pounds. They DO have the money, thats apparent. They just put on value on the lives of ordinary citizens of this county. The Road on which my son was injured has numerous collisions and earlier in the same year man walking was killed on the same road and the year before a cyclist also died as a result of a collision with a vehicle. There decision at the time disgusted me, I am even more disgusted after this revelation. I would LOVE to know just what their priorities and values are.”
by oldhenry, leicester
Wednesday, October 15 2008, 1:49PM
“of course the Councils are also often criticised for not earning enough money from their deposits. Icelandic banks are not crooks -like BCCI was and their interest rates were not that high. I bet some of those deposits above would have been lost if G Brown had not spent your money on a bail out!”
by Barry Smith, Mowmacre Hill
Wednesday, October 15 2008, 11:01AM
“The standard risk of banking is not assured these days and as for bricks and mortar and land then the conditions at the moment are with such uncertainty that the mattress seems to be a good bet, alternatively the businesses of betting shops seems fairly good at the moment. Want to bet?”
by John Ryde, Newbold Verdon
Wednesday, October 15 2008, 10:33AM
“Whilst it is easy to criticise councils for political purposes, like the man in the street, they have to make educated guesses where our money is safe.
In the light of recent events no where is safe.
Bricks and mortar would seem the best bet for the long term, yet we see councils trying to dispose of their housing stock.
Time for a rethink.”