Somerset Lib Dems lose £25m in Icelandic gamble

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It seems that the Lib Dems who run Somerset Council may well have been caught in the local authority equivalent of short selling.

It has been announced that Somerset County Council had £25m invested in Icelandic banks that have now gone bust. One of the questions you might ask is why the Council has so much money freely available as cash. In their defence Councils routinely have money on short deposit becaue they tend to collect Council Tax at a faster rate than they spend it in the early months of the financial year.

However, in this case i gather that the £25m is not cash but mooney they borrowed from another bank. Having borrowed it a one rate they then thought it would be great to invest it in another bank with a higher rate an then pocket the difference!I It is quite likely that the Government encouraged them in this.

So, what now? Well, the money they borrowed will have to be paid back and the only source of that money is the Council Tax payer of Somerset. This will mean that unless they severely cut services they will be increasing Council Tax next year by 16% as a one year payment.

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