UK hyperlocal blog, meet Icelandic blogger: the iDaventry council debt campaign

Launched in April/May 2009, idaventry is a community driven local news and features site with strong editorial comment. I invited publisher Dave Raven to write a guest post for OJB on their latest campaign regarding Daventry Council’s investments in Icelandic banks.

I’m grateful for the opportunity to be writing this guest post, since there will be few occasions when a local community website such as iDaventry.com can speak off-topic about an international event.

The reason is Daventry District Council’s investment fiasco, locking up £8 million of ratepayer’s cash in the four Icelandic banks that crashed so spectacularly last October.

This June a Parliamentary select committee the CLG, concluded Local Governments were badly advised by external treasury management advisers. So that’s alright then – it’s not the Council’s fault.

A deal struck in June 2009 allows the Icelandic financial services compensation scheme to sell Landsbanki’s assets (frozen in the London based bank since October 2008) and pay the proceeds to the UK and Dutch governments.

This information has all been widely reported in the UK. However, I had a different interpretation. To check its validity I ran it by Icelandic blogger and journalist Alda Sigmunds.

Alda lives in Reykjavík and has been blogging at icelandweatherreport.com since 2004. She is exceptionally knowledgeable about Icelandic politics and, after spotting a couple of embarrassing errors, pointed out that whilst I had made some good points I had misunderstood the role of the different Icelandic banks in the UK and Iceland – particularly the UK branch of Icesave. (Which I kept annoyingly calling Icesaver)

The terms of the Icelandic deal are such that the interest on the loan will not be paid from the sale of the assets – that will entirely have to be paid by the Icelandic public.

Alda said,

“In my opinion it is questionable whether the Icelandic people should pay the debts of private individuals but with Icesave, it rests a lot on this equality directive in the EEA (European Economic Area) law. The problem was that Icesave was not a British bank but an Icelandic branch of Landsbanki, and as such is subject to Icelandic laws and regulations. The other Icelandic banks in the UK – Heritable, Kaupthing Singer & Friedlander – were subsidiaries and as such are subject to British laws. Therefore, we are not responsible for covering their debts. Icesave, on the other hand, we are technically responsible for because it was a branch. When the bank collapsed, the Icelandic state guaranteed the deposits of all Icelanders 100%. The argument is that since there were British savers in the same bank (just another branch, which happened to be in the UK) they should also be compensated like the Icelanders – there should not be discrimination on the basis of nationality. UK authorities pressured Landsbanki strongly to move Icesave into a subsidiary – that would have averted this whole mess. However, this wasn’t done.”

While I’m pleased to have the facts straight and the UK government are sticking religiously to the letter of the law, the fact remained that Iceland is a tiny country with a population less than that of Coventry (308,000). My original article published in idaventry.com was a plea to Daventry District Council leader Chris Miller, asking him to raise this issue at his meeting with the LGA on 16 July to consider: “Are we morally justified to be saddling Iceland with these massive loans, bearing in mind they have not personally benefited at all from the debt incurred in their name, a large percentage of which was spent here in London?” I still believe this is a reasonable question to ask.

In fact, it can be argued the UK has been the main beneficiary of the Icelandic bank debt since most of the money was used to acquire premium assets in the UK. The retail shops and businesses bought with the loans from Landsbanki’s Icesave employ British workers who pay British taxes.

It’s expected that under the agreement the debts will take over 15 years or so to repay; in Alda Sigmunds words: “They HOPE there will be sufficient assets to cover the debts.” The UK treasury and Dutch government have paid out the depositors and in my opinion, they should also repay local council debts, recovering what they can from assets already held by the banks in the UK.

Iceland is a decent neighbour who deserves our consideration and any assistance we can offer. Although Daventry is on the list of those owed money from the bank fiasco, I truly believe we should demonstrate our solidarity by appealing to our own government and through the offices of the Local Government Association – to abandon plans committing Iceland to years of debt.

Iceland is trying hard to find any wrongdoers who may have benefited unjustly from the bank crisis and seem to be doing their level best. I say let’s give them help and start to rebuild their economy – which will help us too in the long term.

idaventry keeps raising the issue of the  £8 million invested in the Icelandic banks and I’m certain the council would love me to go away! My suspicion is that this investment was the tip of the iceberg (no pun intended) and they are exposed to many millions more that is locked in other possibly high-risk investments – Bank of Ireland for example at one stage.

I’m only just beginning to realize the power of blogging especially when small communities in England can link directly to blogs in other countries and discover so much about our politics – and possibly make a difference.

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