ECONOMIC MELTDOWN, PART 3: By Steven Vass and Mhairi Macleod

WITH eight Scottish councils forced to admit parts of their budgets were at risk from the collapses of Iceland's top three banks last week, they entered the weekend in recriminations about who was to blame and how it would affect their budgets. Pat Watters, the president of local authorities association Cosla, told the Sunday Herald he had received assurances from council leaders that frontline services would not be affected, but he conceded that it could lead to "delays to projects".

Aberdeen City Council A £130 million public-private partnership to build and refurbish 10 schools in the north east, including secondaries at Cults and Bucksburn, hit the headlines as the largest potential public sector casualty in the Iceland crash, but the Nyop consortium behind the project is stressing that it will continue unaffected. Sigfus Jonsson, managing director of Nysir UK, one of the consortium's members, said that the project was guaranteed by the UK government due to its public-private status. Work started last year and Landsbanki has already released £45m of the funding. Jonsson said he was in negotiations with other banks to become the new main backer and that any costs would be picked up by Landsbanki's administrators and not Aberdeen council.

North Ayrshire Council North Ayrshire had £15m of deposits with Landsbanki and Glitnir and now faces losing the lot - the highest loss of any individual council. Although credit ratings agency Moody's cut the rating of Landsbanki in February and Standard & Poor's cut Glitnir to the high-risk BBB+ in May, the council made no attempt to reduce its exposure. A spokeswoman said: "They are fixed short-term investments. To have pulled out earlier would have incurred a huge financial penalty, but the first warnings that we had from our treasury management people were just a couple of weeks ago."

North Ayrshire's financial adviser was Sector Treasury Services, which has been quoted as claiming that it passed on its concerns about the Icelandic banks to its 250 local authority clients earlier in the year.

North Ayrshire said it was committed to not raising council tax but said it was too early to say whether there would be an effect on services. Its total budget is around £400m a year.

Perth & Kinross Council The council has £1m in short-term investments with Glitnir. It said it had no reason to believe the money would not be returned when the investment period ended in December and said it would make no difference to council tax levels. Its total annual budget is £438m. Ian Miller, leader of the council, has written to the Chancellor for assurance that the Treasury will protect councils from any investment losses, but a spokesman stressed that no council services would be hit by the problem.

Borders Council Council leader David Parker said that Borders had £10m in deposits with Landsbanki out of an annual budget of around £300m. He said that no services would be affected and council tax would not rise, since he thought it possible to renegotiate existing borrowings to make up any shortfall. Over the medium term he conceded cuts would be a possibility if the money was not recouped, although he said this would not necessarily hit frontline services.

Asked why the council made the investments this year when the credit agencies downgraded the Icelandic banks, he said: "The advisers we use Butler's were saying these were sound investments. I don't blame anyone. I blame the unprecedented events in the market."

South Ayrshire Council From a total services budget of £250m, South Ayrshire has £5m tied up with the Icelandic banks. A spokeswoman said there would be no council tax rise and refused to recognise that there might even be a budget shortfall. She said that "in the short to medium term", there would be no effect on services either.

She added: "As soon as the credit ratings of some Icelandic banks changed, those with poor ratings were deleted from our list of investors.

"At the point where we made short-term investments with Landsbanki they had the highest possible credit rating in relation to short-term investment, this rating having been provided by the leading national credit reference agencies."

South Lanarkshire This council is facing a £7.5m hit on its annual £1 billion budget. Having been advised by Butlers, it said that at least some of the money should be salvageable. It said that the Landsbanki subsidiary Heritable Bank retained its top credit rating until late September, although the parent company was downgraded months earlier. The collapses will have no effect on day-to-day services or council tax.

East Ayrshire Council As much as £3m of East Ayrshire's total £352m annual budget was invested in Iceland. Having been advised by Butlers, a spokesman said that it made the investments at time when the banks had the highest credit ratings and withdrew them as soon as the ratings were cut. He added that there would be "no adverse effect" on services or council tax, but declined to say how the loss would be absorbed.

Moray Council Moray had £2m of its £200m budget tied up with Landsbanki, but said there would be no effect on council services or jobs. With its investments due to be repaid this month, it has been told it will not get them back on their due dates but should get them back eventually.

East Renfrewshire Council East Renfrewshire became the latest council to admit problems when it said on Friday that £1m of its £15m investments were tied up with Heritable Bank. Out of a total annual budget of £100m, a council spokesman said there might be a "minor reduction in the capital programme and some budget trimming". But he said there would be no service cuts and no council tax rise.

He added that the council had inquired in April about withdrawing its money but had been told that the bank was not in the habit of releasing money before its due date.