Scots councils' £40m invested in Icelandic banks at risk

More than £40m of Scots taxpayers� money is at risk as a result of the Icelandic banking crisis. Seven local authorities confirmed they have investments in the country�s troubled financial institutions including Landsbanki, Heritable and Glitnir.

More than £40m of Scots taxpayers' money is at risk as a result of the Icelandic banking crisis.

Seven local authorities confirmed they have investments in the country's troubled financial institutions including Landsbanki, Heritable and Glitnir.

An eighth has contracted a company funded by Landsbanki to carry out a multimillion-pound schools project.

Aberdeen City Council signed a deal in February with NYOP, a consortium which is borrowing money from bust Iceland bank Landsbanki to part-fund the £120m scheme to build and refurbish 10 Aberdeen schools.

The money is supposed to be invested in the construction of seven new primary and two new secondary schools in the city.

The troubled authority already has spiralling debts in the region of £50m and faces a further £20m of cuts in the next budget.

The Icelandic Government seized control of Landsbanki earlier this week after the country's economy went into meltdown.

A spokesman for the council said: "Aberdeen City Council has no money invested in any Icelandic bank but there is Landsbanki involvement in the £120m 3Rs project to rebuild and refurbish several of its schools. The city council does not begin to pay for the schools until they are operational. The building phase is under way and is scheduled for completion by September 2010. The project is currently ahead of schedule."

The other members of NYOP's consortium are Nysir, an Icelandic property company, Operon, a facilities management company based in Yorkshire, and Pihl UK Ltd, a major construction contractor based in Denmark.

After the Herald revealed yesterday that Perth & Kinross Council had a £1m investment with Glitnir, six more local authorities confirmed they had money invested with stricken banks.

A South Lanarkshire Council spokesman said the council was pursuing a £7.5m investment with Landsbanki and its UK subsidiary Heritable Bank through the Convention of Scottish Local Authorities (Cosla). "It is important to stress that the deposits are not lost," he said.

South Ayrshire Council has also invested £5m in Landsbanki which the authority says is due to be returned in stages over the next two months.

South Ayrshire Council chief executive David Anderson said: "The rapid change of circumstance in relation to this bank (Landsbanki) is a result of the challenges facing global banking and could not have been predicted."

North Ayrshire Council, which earlier disclosed it had investments with the banks, revealed the amount was £15m. The authority invested £5m with Landsbanki and £10m with Glitnir Bank, which are short-term investments. Glitnir was taken over by the Icelandic Financial Supervisory authority on Wednesday.

East Ayrshire said it had identified "potential exposure" of between £3m and £5m with Heritable and Kaupthing Singer & Friedlander, which went into administration earlier this week.

Earlier, Moray Council revealed it had £2m in Landsbanki. Finance committee chairman Allan Wright said the council had been informed by its treasury management advisers that any maturities in the short term would not be repaid.

Last night, Scottish Borders Council came forward to confirm investments of £5m with Landsbanki and £5m with Heritable Bank. In a statement, council leader David Parker urged Cosla to join the Local Government Association in its discussion with central government to seek a solution with regard to protecting the investments.

Chancellor Alistair Darling said yesterday the government would protect the savings of private investors but councils were "more of an informed investor".

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