The three Ayrshire councils, North Ayrshire, East Ayrshire and South Ayrshire all appear to have had money on deposit with the Icelandic banks which have effectively folded and been taken over by the Icelandic government. Their position is different from Aberdeen City Council's problems over a £120 million loan from one of the Icelandic banks. At the moment it would appear that the money that the three Ayrshire Councils have on deposit with Icelandic banks will have to be written off.
Councils are required to manage Council Tax payers money efficiently and this requires them to seek return on any monies they have in hand. It was legitimate therefore for the Councils to have money on deposit with Banks. It will be legitimate however to question if they were sufficiently monitoring the risks recently in respect of the banks that they were using.
North Ayrshire Council had largest Icelandic deposit
It would appear that of the Ayrshire Councils, North Ayrshire Council has the most money in an Icelandic Bank with a sum of around £15 million being quoted. A figure of around £1 million has been suggested for East Ayrshire Council.
(Update: Figures on deposit with Icelandic banks now estimated at North Ayrshire Council £15 million, South Ayrshire Council £5 million, East Ayrshire Council £3.5 million. It would appear that among UK Local Authorities North Ayrshire Council had the fifteenth highest amount of money on deposit with the Iceland banks.)
It remains to be seen if the UK governments use of anti-terrorist legislation to freeze Icelandic assets in the UK will persuade the Icelandic Government to release the money owing to UK public bodies.
There would be much sense in the Icelandic Government and the UK government finding a mutually helpful solution here. Iceland is at present going to Russia for loans, something which it may not have done entirely enthusiastically.
For Russia , with the potential opening of Arctic waters due to global warming induced sea ice reductions, it makes sense to seek leverage with another Arctic nation.
UK relations with Iceland are also important, not only to the UK but also to Iceland. Until the recent crisis we provided a natural line of expansion for Icelandic business and there is no reason that we or Iceland should wish this to be problematic in the future. Similarly it is in UK interests to have good relations with a strategically placed Arctic nation such as Iceland.
Within both states the public will want their economies to settle and debt problems to be resolved constructively and fairly. It is to be hoped that Iceland and the UK can identify a constructive solution soon to this problem.