One Barnet:”When something looks too good to be true………”
Between November 2006 and September 2007, ahead of the credit crunch, Barnet Council entered into a number of fixed term deposits worth £27.4 million with two Icelandic banks. Councillors were advised that the Icelandic banks provided a very attractive and sound return on the investment, they were also informed that these banks had sound strategies, business plans and delivered excellent performance. The investments in these banks were apparently within the Council’s Treasury Management Strategy and Annual Investment Strategy approved by the Cabinet Resources Committee in March 2008.
However, during the same period newspapers were reporting that these very banks were lending huge sums of money to investors (some Icelandic) to buy companies (many UK businesses) and paying eye watering prices which even the Middle Eastern sovereign funds would not pay.
What happened next was £27.4 million pounds of Council assets were frozen in two Icelandic banks following the collapse of the Icelandic banking system.
The point is that nothing is guaranteed and to date the Council has not provided either of the Council Scrutiny Committees of any robust evidence of learning lessons from other Councils.
It is wrong and naive to claim other Councils did not seek expert advice about drafting contracts. To suggest that by spending millions on expert legal advicethe Council wil be able to hold a multinational company to account and hence guarantee savings is quite frankly frightening.
In the real world everyone (apart from One Barnet Supporters) understands one thing
“Their (multinational companies) lawyers are always bigger and better
than the Councils.”