I posted the following on the Total Politics local government blog and have updated it slightly for here.
There is an excellent analysis from Ben Duckworth which draws lessons from the issue of local councils and the Icelandic banking crisis.
He's right. It certainly appears that some councils did let their subscription to Investors Chronicle lapse (or not actually pay any attention at all).
As a former journalist on Hedge Fund Manager Week, Ben is certainly better qualified than me to understand the kind of risks councils were running. However I still think commentators reacted without knowing the facts and I think readers and listeners followed that lead eagerly. The debate was 'framed' and from then it was only a question of the degree of kicking which councils would receive.
This local authority kicking is apolitical. No-one is getting any real joy out of trying to pin it on a Conservative or Lib Dem-controlled administration. The mood is "a plague on all those incompetents".
For instance check out this post and the comments on Iain Dale's blog.
Iain's posted a follow-up and he concludes by saying:
"Whatever the rights and wrongs here, it is clear that councils of all political colours have made bad investments in Icelandic banks. Of course we need to know on what basis these decisions were made, but for any one political party to kick dirt at the others reeks of hypocrisy. Let's just accept that everyone has some explaining to do."
Ben then says: "If we have banks being nationalised then, the unfortunate result (leaving aside whether this is unfair or not) will be that local government simply can't be trusted with more control over money."
But I'm just not sure how much power they have at the moment. So much money is ring fenced, partitioned, directed or otherwise coralled.
To turn Ben's warning on its head, why not use the situation as a spur to localism and free councils from the requirement to chase Whitehall funds all the time?
Meanwhile there's a little-reported sideline to this issue which is the impact on local government workers. Union Futures has a piece on this. Over at Jon's union blog there is a report from a meeting of the Left Economic Alternative Panel on Monday night which partly addresses this aspect.
We may yet see local government workers take action if the crisis impacts on their wages and they may well gain general public support. The mood is for the banks to pay and not everyone else.
Just as Gordon shores up his position another dam bursts.
Update: The Stirrer has an interesting piece on the effects on local government finance in West Midlands.
Update (2): The BBC reporting councils to meet the government over this. Contrary to Iain's plea for avoiding the partisan blame game, the Tories Karl Rove clone, Eric Pickles, can't help himself.
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