Response to letter from Cllr. Ron Forrest re. investment in Icelandic Banks

Written by Councillor Sam Crabb and published in requested publication in the Western Gazette on Wed 5th Nov 2008

Dear Sir

I write in response to Cllr Ron Forrest's letter published in the Western Gazette last week.

The money that Somerset County Council invested is a large sum and our responsibility to the council taxpayers of Somerset is to maximise our return on investments. We are so good at this that Avon & Somerset Police Authority plus other public bodies use our Treasury Management team to maximise their return on deposits.

Part of the strategy to maximise returns from invested funds is a risk profile, by the nature of investments higher risk investments produce higher returns. A large bulk of everybody's money in the UK is invested in a much higher risk profile of the stock market. Approximately 25% of all investments on the stock market have gone down in recent weeks. These losses are across the UK and are considerably more than the money invested in the UK Subsidiaries of the UK banks.

The Government have frozen all the assets of the Iceland Banks in the UK. The Receivers appointed to deal with the Iceland Banks have reported that the assets roughly match the liabilities. This means that the County Council has not lost the £25 million but should receive the capital sum back from the Receivers, but may not receive the anticipated interest.

These interest loses will be roughly 6% of the capital sum will be considerably less than the losses that have been sustained on the stock market. These basic financial facts seem to be lost upon Cllr Ron Forrest and Cllr Ken Maddock ( "Cut Back Ken" ). This can be seen in their appalling management of Mendip District Council's finances. This is also reflected in the parlous state in which the Tories have left West Somerset District Council.

We would suggest that an understanding of financial matters should be expressed as opposed to a negative attack from a politically biased viewpoint.

A great number of local authorities, charities and government bodies invested in UK subsidiaries of the Icelandic Banks. Many of those are Conservative authorities, including Dorset and Kent. We have also called for a full investigation via the Local Government Association.

Yours faithfully,

Cllr. Sam Crabb - Portfolio Holder for Strategic Resources & Finance