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‘Reckless gambling’ of taxpayers’ money
Report slams council investment after bank collapse
A LITANY of flaws have been identified in Westminster Council’s investment strategy following the loss of £17million in taxpayers’ money in the Icelandic banking crash.
An independent report by top accountancy firm KPMG commissioned in the wake of the debacle has been branded “damning” by opposition leaders at City Hall.
It blasts finance chiefs for not making “the best use of market information available to them when making investment decisions” and recommends outsourcing the £450m investment arm of the council.
The report, which cost £37,000 to draw up, also said there was no clear system in place to measure the council’s performance in making investments.
In October the council wrote off £17m despite repeated warnings highlighting the risky market – one of hundreds of local authorities which had fallen victim to the meltdown.
The council’s top finance chief, Melvyn Caplan, has played down the report, defending the decision to invest in Iceland, claiming they could not have forseen the unprecedented global financial crisis.
At the time, leader of the council Colin Barrow promised there would be no threat to the delivery of services, but last week it emerged savings would be clawed back by axing the much championed ward budget scheme.
Labour leader Paul Dimoldenberg, who dubbed the council’s investment strategy “reckless gambling” following the loss, said: “This is a damning report exposing a catalogue of incompetence for which the Conservatives should take full responsibility. We already know that the Conservatives have put £17m at risk because of their policy of investing in now-failed Icelandic banks.
“But now we know that the management and investment of over £450m of public money has been put at risk because of the Conservatives’ failures. Isn’t it time that Councillor Barrow, who was cabinet member for finance at the time and responsible for investing council money, took responsibility for these glaring failures?”
Councillor Melvyn Caplan, cabinet member for finance, said: “Westminster, like many other local authorities, private companies and individuals, has been caught up in an unprecedented global banking crisis.
“We have taken quick, decisive action and we commissioned this robust, completely independent report in order to identify any weaknesses.
“In summary, KPMG states that our in-house team over the past 18 months has continued its strategy of investing in short-term investments with highly rated financial institutions. The Icelandic banks at the time of investment were A1-rated by independent experts.
“Although the crisis is one we may not have been able to avoid, we recognise that we need to further strengthen our procedures.
“The report states that our internal controls were ‘essentially satisfactory’, and in no instances were they deemed to be ‘materially ineffective’, but we accept there are several areas which can be improved and we have already put into practice many of the key recommendations.
“Due to prudent management we have ensured the council has sizeable reserves to rely on in times of need.
“We have not built up debts or squandered away money during the boom years, so we are therefore in good shape to weather the current downturn.”
He added: “We will continue to fight for the return of our assets held in Iceland which were frozen by the government, but I want to make clear that at no point will frontline services be affected by the collapse of the Icelandic banking system.” |
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