The Audit Commission is poised to retract some of its most damning allegations about local government’s involvement in the Icelandic banking fiasco, it has emerged.
Its recent Risk and Return report accused seven councils of “negligence” for depositing funds with the financially troubled nation’s banking institutions after their credit ratings were downgraded on 1 October 2008, shortly before 127 councils had almost £1bn in assets frozen.
One of the seven — Havering LBC — said this week that following its threats of legal action, the commission had agreed to revise its report, offering a new form of wording.
But the council, which had £12.5m invested in Icelandic banks and made its final deposit 15 minutes before learning of the ratings agency downgrade, said it was still not happy with proposals to describe its actions as “unfortunate”.
Kent County Council , which had £48.9m in Icelandic investments and was also accused of negligence, has also been offered a reworded description of its activities.
He added: “It is clear that the commission took a cavalier approach and amended its report in an effort to grab headlines.
“As well as doing huge damage to the standing of the seven councils that were named, I believe that this saga has further tarnished the reputation of local government, at a time when the Audit Commission should be working with councils to improve services to local taxpayers.”
Kent chief executive Peter Gilroy said he was “encouraged by the tone” of negotiations, and that the commission was proposing to issue amendments to the report with the word ‘negligent’ omitted.
An Audit Commission spokeswoman confirmed that negotiations were taking place with Havering and Kent over their grievances, but said it would be “inappropriate” to comment until a final decision had been made.
She also refused to confirm whether any remedial action would also apply to the other five local government bodies accused of negligence: Redcar & Cleveland Borough Council , Restormel Borough Council , Bridgnorth District Council , North East Lincolnshire Council , and South Yorkshire Pensions Authority .