Recovering the Iceland Cash

08:25 Wednesday 13th July 2011
Peterborough Breakfast Show
BBC Radio Cambridgeshire

PAUL STAINTON: Back in 2008 you may remember the Icelandic banking crisis? It saw Peterborough City Council lose about £3 million’s worth of investments. Well a year ago it was announced that two of the three million pounds had been recouped, and that the other £1 million would also be recovered. Has it? Let’s speak to John Harrison, who’s Director of Strategic Resources for Peterborough City Council. Morning, John.
PAUL STAINTON: have we got it back? Have we got the extra million back?
JOHN HARRISON: We didn’t say a year ago. I think you’re being slightly disingenuous. We never said we would get the whole lot back. Where we are at the moment ..
PAUL STAINTON: You were very hopeful John.
JOHN HARRISON: I never ever said that. I never ever said that. And what we are in the position is now that we think that we’ll get up to probably 85 pence in every pound invested back. So the loss could be about £430,000 out of £3 million.
PAUL STAINTON: Woah! That’s a lot of cash isn’t it, particularly ..
PAUL STAINTON: .. when you think of the lost interest as well that we’ve lost as well?
JOHN HARRISON: Yes it is. It is. It’s really unfortunate, and you know I’d said before in the past it’s not one of those things that I would ever have wanted to do in my career, but it wasn’t just Peterborough City Council. It was the whole of the local government community virtually, up and down the country that got caught by Iceland and that. You know, we listened to all the professional advisers. When we put it in it was April 2007. But we couldn’t get it out when things went wrong in October 2008.
PAUL STAINTON: Yes. So just to clarify, in total then, of the £3 million, do we know exactly how much we;re getting back?
JOHN HARRISON: Right. At the moment, out of the £3 million, actually physically back in our coffers we’ve got £1.7 million. And so we’re predicting that if .. based on the best estimates of what they think the recovery, that would go up to about nearly £2.6 million. So we’d lose approximately £400,000.
PAUL STAINTON: And about what, £170,000’s worth of interest perhaps, over the period?
JOHN HARRISON: Well it’s difficult to say the interest. I mean interest rates now are sitting at half a per cent. That’s the difficulty. It’s good for anybody that’s got a mortgage, but in terms of where we’re trying to invest our surplus cash at the moment, which is a mixture between our local bank and other councils, you’d be lucky if you get a half a per cent on it.
PAUL STAINTON: So we’re roughly, if you take into account a bit of interest here and there, we’re about half a million out of pocket.
JOHN HARRISON: Yeah. If you’re on about ball park figures, yeah, that’s probably the best figure to quote. Yeah.
PAUL STAINTON: Take you back then, Christmas 2008, if someone told you then you’d get two thirds back, would you have taken it?
JOHN HARRISON: At that time it was difficult to know whether that would be good or bad. And everybody was speculating. I work with the Local Government Association, and I represent all councils, and one of the banks, KSF, and it’s hard work. People think that, well OK, the money get it back, will you not, is it all bad? Some of the stuff they did was completely good. And so the reason it takes a while to get it back is if somebody took a loan from the bank, they’ve done nothing wrong. They’re making their repayments back. So you know you can’t force them. That’s why it’ll take a while to get that money back. But ..
PAUL STAINTON: Is it a welcome surprise, this money John, or has it already been put into various budgets and allocated?
JOHN HARRISON: Yes we’ve already made allowance for it. Matter of fact we’ve been able to release some of the money that we thought we weren’t going to get back as better projections has improved and that. So this isn’t impacting on Council’s budgets at the moment. Matter of fact as the forecasts get better and better we’ll be able to release more money back into the current budgets.
PAUL STAINTON: John, thank you for that. John Harrison, Director of Strategic Resources for Peterborough City Council. So roughly speaking we’re getting about £2.5 million of the £3 million back from that Iceland banking crisis.