Council to offset £9m lost in crisis

Wyre Forest District Council will avert a cash crisis by carrying forward £9 million of losses tied up in failed Icelandic banks to the next financial year, it has emerged.

The Government has given the authority special dispensation so it does not have to cover the cost of its losses until they can be more easily absorbed. The council hopes to have recovered most of the cash it is owed by 2010/11. It has received more than £1 million.

A report prepared by the Audit Commission and presented to councillors this week states the losses would have a "huge impact" on the council's budget and recommends they should be "in effect carried forward rather than impacting on revenue balances this year".

The council should use reserves to plug any funding gap, the report says.

Council leader Councillor John Campion said: "The Government's guidance and the recommendation of the Audit Commission is that we offset that £9 million uncertainty for the moment."

Wyre Forest clawed back £1 million of the council's £5 million investment with Kaupthing, Singer and Friedlander from Administrators Ernst Young. The council also received more than £160,000 from £1 million in The Heritable bank.