Ministers from the UK and Scottish governments today agreed to work together to tackle the impact of the Icelandic banking collapse on taxpayers.

Ministers from the UK and Scottish governments today agreed to work together to tackle the impact of the Icelandic banking collapse on taxpayers.

Secretary of State for Scotland Jim Murphy said he held "very constructive" talks with Scottish finance secretary John Swinney and Pat Watters from council representative body Cosla.

Mr Murphy called the meeting one week after it emerged more than £45 million of taxpayers' cash was at risk from the collapse of Icelandic financial institutions Landsbanki, Heritable and Glitnir.

Mr Murphy said: "This morning's meeting was a perfect example of the UK Government, the Scottish Government and Cosla working together to address the serious issue of Scottish local authorities and their deposits in Icelandic banks.

"We had a very constructive meeting and John Swinney, Pat Watters and I agreed to work together to support the UK Government in its endeavours to get full compensation for local authorities and charities with deposits in Icelandic banks."

Eight local authorities and one fire board have been caught up in the Icelandic crisis.

North Ayrshire had the highest investments with £15 million in the institutions.

Scottish Borders invested £5 million in Landsbanki and £5 million in Heritable.

Aberdeen City Council had not invested in the banks, but revealed its £120 million project to build or refurbish schools was being financed from Iceland.

Others to invest included South Lanarkshire with £7.5 million, South Ayrshire with £5 million and Moray with £2 million deposits.

Another public body caught in the crisis was Strathclyde Fire and Rescue Board, which said it had £3 million on deposit with Heritable.

Mr Murphy said he briefed Mr Swinney and Cosla on the "significant steps" taken by the UK Government.

He said it would be "useful" for the Treasury to maintain regular contact with Cosla and added: "I am confident we can work together to get a fair deal for councils across Scotland affected by the situation in Iceland's banks."

Mr Watters, president of Cosla, said he would fight "tooth and nail" to recover taxpayers' money.

He said: "In discussing the impact of the collapse of the Icelandic banks on Scottish local government, Cosla made it clear that it will fight tooth and nail to ensure recovery of these sums of money and obviously the Treasury's work with the Icelandic banks is the first line of action.

"In recognition of this an important outcome of today's meeting is that there will be parity of treatment here and Scottish local government will be represented at UK discussions involving the Treasury at both a political and officer level."

Mr Watters said councils can manage the financial implications "in the short term" and added: "If there is a lengthy delay in the recovery of these deposits then we will be seeking further discussions nationally regarding guarantees for local government."