Darling's gamble
Peter Hoskin 4:33pm
Alistair Darling's refusal to guarantee the savings of those councils and other bodies which have money tied up in Icelandic banks could have some particularly nasty side effects. Writes the Times:
"...The Times learnt that some town halls were considering withdrawing all their cash from private institutions and putting it into more secure Government bonds. If dozens of councils follow suit this could lead to a damaging run on the banks, local government experts cautioned. Westminster and Kensington and Chelsea, two top London councils, said that they were looking at this option.Tony Travers, of the London School of Economics, said: 'Local authorities hold tens of billions of pounds in pri- vate banks. If the Government refuses to give them any protection there they will take it out, causing a run on the banks. The council-tax payer will also lose out as town halls will get lower interest in government bonds.'"
Darling could be in for quite a kicking over this. If the worst-case scenario - as sketched out above - does take place, then the councils will be able to point the finger of blame at the Treasury, whose investment advice they claim they were following in the first place.
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kinglear
October 10th, 2008 5:47pm Report this commentYes they have absolutely no idea what their actions mean in a wider context
Timothy
October 10th, 2008 7:31pm Report this commentI think Mr David Cameron should include in his Manifesto the building of additional prisons to accommodate those responsible for the pillaging of our resources over the last decade.
Londoner
October 10th, 2008 11:48pm Report this commentAn idea:
Allow local authorities, as public institutions, to open accounts and make deposits at the Bank of England. It won't be the highest rate of interest but would be government backed. The Bank of England could then use the money towards its "oiling of the wheels", i.e. the liquidity, of the banking system.
Two problems alleviated in one go.
Is there some fatal flaw in this idea?
luke
October 11th, 2008 12:58am Report this commentOr we could spend more tax payers money to bail them out
JohnAnt
October 11th, 2008 11:08pm Report this commentCouncils absolutely have to invest the taxpayers' money in long-term bonds rather than using it to cushion further rises in tax, because, er...?
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