THE chief of Purbeck District Council has reassured taxpayers that services will not suffer, despite the fact it is likely to lose almost £300,000 in the Icelandic banks fiasco.

Almost a year ago local authorities across Dorset and the rest of the country had their fingers burned when banks such as Landsbanki, Glitnir and Kaupthing, heralded as top investments just a few years earlier, collapsed.

Purbeck has two investments with Icelandic banks – £1m with Glitnir and £1m with Landsbanki.

The latest update report on its finances shows that, although the Glitnir cash should be returned in full, including interest up to April 2009, the percentage of the Landsbanki money likely to be returned has dropped from 95 per cent to 83 per cent.

Purbeck council chief executive Steve Mackenzie said that, after lost interest had been accounted for, this meant the authority had included a reduction in the Landsbanki investment of £283,000 in its accounts. This represented a scenario that reflected “the likely delay in the return of the money due to the council”.

Mr Mackenzie said: “The total reduction in the value of the investment in Landsbanki has been financed by using money that the council would have put into its reserves, as a result of reducing the amount spent on services in 2008/09.

“This reduction has not had an effect on the standard of services provided to local people.”

He added that the council did not expect to receive any interest on the cash in the current financial year, but carried adequate reserves to deal with the effects of the investments.

Mr Mackenzie said: “The council again expects to cover this shortfall in income from reducing the cost, but not the standard, of the services it provides.

“The council will not increase council taxes to cover the costs of these investments, nor does it expect there to be any effect on the quality of the services it provides in either the current year or in future years.”

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