'Excessive' council tax rise warning

Council tax in Wyre Forest will rise by "excessive" levels if the district council's £9million investment in struggling Icelandic banks is not returned, it was warned today.

The chief executive of Wyre Forest District Council, Walter Delin, has written a letter to Prime Minister Gordon Brown seeking support to get the money returned.

The council has £3m in Landsbanki Islands HF, £5m in Kaupthing, Singer and Friedlander and £1m in Heritable Bank Ltd.

The three Icelandic banks have either been placed into administration or receivership. In the letter the council says if the money is lost, there will be a "devastating impact on service provision".

It also says there would be council tax rises which would be judged "excessive" by the Government. The council's net budget is £14.4 million – so the £9 million at risk represents about two thirds of this amount.

Mr Delin's letter says: "Indeed we are shocked to discover that given the deposits were made through the money market, these are regarded by the administrators as "non preferential" claims, which may take a considerable time to resolve."