He has published a Q&A sheet put together by Barnet Council on his blog. The most revealing Q&A is the last
What is the worst case scenario should the money be lost and the authority not compensated by Government?
The Council does not get any of the money invested back and has to write off the amounts invested to the general fund, pension fund, housing revenue account and capital programme. In the event this occurs, the Council would have to take actions to mitigate the losses in each of these areas.
This has massive implications for everyone. Council Taxpayers, staff in the Barnet pension scheme, Council tenants. Now it clearly states that this is the worst case scenario, but it scares the hell out of me. It seems to me from the briefing sheet that the only hope is that the Central government will bail Barnet out. If this does happen, clearly it will benefit all of us Barnet residents, which would be good. The only trouble is that all of the residents of councils such as Brighton & Hove which did proper risk assessments and pulled out of Iceland would be punished by central Government through increased central taxation. How would you feel if you were bailing out Brighton, when Barnet had been prudent.
I've already shown that Council Leader Mike Freer's assertion that no one could foresee this situation is incorrect. Mr Freer worked for many years as a banker, so you think he would have had an inkling. Lets have a look at a few early warnings about Icelandic banks.
September 2006 - Euromoney notes that Icelandic banks are potentially vulnerable. Debt was 167% of GDP.
21 Feb 2006 - Rating agency Fitch changes the rating of Icelands sovereign debt from Stable to Negative because of a current account defecit of 15%.
December 2006 - Standard and Poor downgrade Icelands sovereign debt rating.
August 2007 - The Subprime mortgage situation provokes Stock market Decline.
November 2007 - Standard and Poor puts Iceland on watch for Downgraded assessment. The FT write "Some investors are now wondering whether Iceland could be heading for a bout of financial turbulence".
Jan 2008 - Moody's rating agency puts all Icelandic Banks on review for possible downgrading. February 2008 - It cuts Landisbanki's long-term rating.
31 March 2008 - Kinross Council removes all three Icelandic banks from its list of approved Investments.
I could go on, the pace of the warnings really hots up from April onwards. The question is, at what point should Barnet Council have recognised that Icelandic Banks weren't a safe place for it's deposits. At what point should the Barnet Finance team have started saying "This isn't a good place for our staff's pensions & other cash".
At the very least, briefing papers should have been produced and there should have been some discussion as to whether this was a sensible strategy in full council.
Now there are thousands of people in Barnet who want to know what is going on. Many of us are worried about huge council tax rises. Where do we find out. Well there is Councillor Macdonalds blog, but what about the more mainstream sources of information. I would have thought that the questions and Answers (and much more) would be front page on the Barnet Council website. Well it isn't even mentioned at 18:38 on Monday 13 October as I write this. What about our esteemed local paper? How have they covered the story? What does the Edgware/Barnet/Hendon/Finchley Times have to say.
Well there is a story dated on Thursday 9th October, but to be quite honest, there is more detail on Councillor MacDonald's blog. One rather strange thing is that there are a whole plethora of new stories posted today on the Times website, about such exciting things as a break in at the Bowls club, and a 70 year old pensioner trying to meet his sweetheart, which are given more visibility. In fact there are so many new items that the story about the Icelandic banks has been knocked off the first page of not only the homepage, but also of the news page. Now far be it from me to criticise the Times editorial policy, but surely they realise that the Icelandic Bank story is far more important to us, it may well hit us all very hard. I'm not a conspiracy theorist, but it seems bizarre that the story hasn't been followed up and has been relegated from the front page so quickly, with a sudden flurry of shall we say, rather uninspiring stories.
Now far be it from me to tell the Editor of the Times, Phil Crowther, how to do his job, but let me explain what I would do in his place. Firstly I would have recognised that the situation at Barnet Council is a massive story. Secondly I would have made it my reporters top priority to find out everything they can and put the other stories on the back burner. Thirdly, I would have had a credit crunch update as my top story. I would have posted all new, public domain information onto the website as it emerged. If nothing else, I would have at least given sketchy outlines, so my readers anticipate the full edition of the paper. The details of the development of the crisis are not hard to find out, the briefing note from Barnet is on Councliior MacDonalds website. I found all of this out when I finished doing my "real job" so how hard could it be for a team of trained journalists. Maybe they just haven't realised that the world has moved into the 24 hour rolling news age and we use websites as our primary source of information. If they want people to view their website and newspaper with credibility, they have to have up to date stories.
Now I hope Phil proves me wrong and there is a massive 9 page expose in the paper. If there is I'll send him £20 to buy the boys and girls a beer. If there isn't I will pour myself a nice large glass of Bushmills Whiskey, pick up my guitar and compose a sad lament to "The Spirit of the Times" - Over to you Phil