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Treasurers' flight to safe deposits

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The full extent of council treasurers’ flight to safety following last autumn’s financial turbulence has been demonstrated by new Office for National Statistics figures.

April’s financial statistics — the first to include full details on council investments for the fourth quarter of 2008 when councils were responding to the Icelandic banking crisis — show a net
transfer over the three months of more than £1.5bn into the Treasury’s ultrasafe but low-return debt management account deposit facility (DMADF).

The figure is by far the largest net quarterly transfer of the past five years. Just £167m was deposited in the previous quarter, while the previous high was £249m, deposited in the first quarter of 2004.

Overall, deposits in banks fell by £2bn and deposits in building societies by £1.8bn between the beginning of October and the end of December 2008.

LGC previously reported how the DMADF had seen gross deposits rise by £6.8bn in October, seven times the level of the previous year (LGC - 26/02/09).

A spokeswoman for the Department for Communities & Local Government insisted the total amount placed in the DMADF was “not a large proportion” compared with councils’ total investments, which stood at £35.6bn at the end of the year.

A spokesman for the Treasury’s Debt Management Office said: “Towards the latter part of last year people tried to look for a secure place to put their money.”

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