Council cash will stay in troubled bank

JON WELCH Local authority bosses have reassured council tax payers that millions of pounds of public money invested in Northern Rock was safe - but said they were closely monitoring the situation.

JON WELCH

Local authority bosses have reassured council tax payers that millions of pounds of public money invested in Northern Rock was safe - but said they were closely monitoring the situation.

Norfolk County Council, and South Norfolk, Breckland and Forest Heath district councils between them have £10 million invested with the troubled bank.

And in the last six days, nearly £2 million has been wiped off the value of Northern Rock shares held by a county council-administered pension fund for Norfolk's public sector workers.

But council bosses said they would not be following the thousands of private investors who have been queuing to withdraw their savings.

South Norfolk Council has £3 million with Northern Rock, out of a total of £34 million in investments. Leader John Fuller said the council's portfolio was spread between 17 different banks and building societies in order to minimise risk.

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“We review all our investments every three months, and the most recent review was on Monday, September 10.

“We have taken comfort in the statements from the Bank of England and the Financial Services Authority (FSA), and from the fact that Northern Rock is still on course to make profits of £400m this year,” he said.

“That's not to say we are not taking the situation very seriously. We're reviewing it on a daily basis.”

Mr Fuller said the council's advisers had recommended it keep its money with Northern Rock, and said there would be heavy penalties for withdrawing it early.

Paul Brittain, head of finance at Norfolk County Council, said the £1.9bn Norfolk Pension Fund held 498,535 shares in Northern Rock, less than 0.1pc of the fund's total value.

“Decisions about whether to retain or dispose of individual shareholdings are left to our specialist fund managers, who have a track record of success in managing the fund effectively, and they will be monitoring the situation closely and do what is best for the Norfolk fund,” he said.

The council also has £2.5m invested with the bank at a “favourable rate of interest”.

“This represents less than 1pc of the total cash investment held by the council in the market at the present time. Given the current turbulence in the money markets and having consulted with our advisers, we will not be having future dealings with the bank for the time being.

“However, our advisers are monitoring the situation and are not recommending that we need to take any action at the present time, given the long-term nature of the loan.”

Forest Heath Council has £2.5 million invested with Northern Rock until June 2009. “We have spoken to our brokers and we are happy that the funds are secure,” said a spokesman.

Breckland Council has £2m with Northern Rock. Mark Finch, head of financial services, said: “We have taken advice from the leading financial experts - the Bank of England, Butlers and the FSA - and are confident that our investment is safe.

“We will be monitoring the situation very closely to ensure we can react quickly if there is any change.”

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