The Stage

Iceland crisis poses ‘no imminent threat’ to arts cash - councils

Published Thursday 23 October 2008 at 10:45 by Lalayn Baluch

Local authorities are striving to assure the arts sector that culture budgets and theatre building projects across England are not under threat following the collapse of Iceland’s banks, which has led to nearly £1 billion worth of council deposits being frozen.

According to the latest figures from the Local Government Association, 123 authorities have cash in Icelandic accounts, totalling £920 million. The worst hit by the collapse include Kent County Council, with £50 million tied up, Norfolk County Council with £32.5 million and Westminster with £17 million.

There have been widespread fears that this could lead to arts budget cuts across the country. But LGA culture spokesperson Sarah Cordey insisted that services are under no “imminent threat”, adding that it was too early to say whether arts provision would suffer in the long term.

She explained that the amount equated to less than 1% of councils’ annual spend and told The Stage: “Although the numbers are very big - and while our priority remains absolutely getting town hall funds back from Iceland - there is no reason to panic in terms of council services grinding to a halt or immediate cuts.

“At the moment, times are tight. Councils have had one of their worst financial settlements for a decade. In common with every man on the street, councils are suffering from rising prices, as inflation soars, and they inevitably face difficult decisions with or without the Icelandic bank situation.”

Representatives from the individual local authorities echoed the LGA’s assurances. A Kent council official confirmed that its investment in the £25.5 million Marlow Theatre development - being led by Canterbury City Council - was safe, and council leader Paul Carter said: “KCC has no liquidity problems and will continue to deliver high-quality services to the residents of Kent.”

Westminster has given “categorical” assurances that it is functioning as normal and that there will be no effect on the arts or the development of its £6 million Theatreland strategy.

“It is too early to say what the impact will be. Westminster has got £70 million in reserve, so it is still in a fairly strong financial position. Short term or long term there shouldn’t be any difficulties,” a spokesman said.

Aylesbury Vale District Council, which is leading a £26 million theatre project, said that it was hopeful of getting back some or all of its £3 million frozen assets.

Commenting on the news, a council representative said: “AVDC has spread its investments widely in order to reduce risk, so the amount of capital ‘at risk’ with Icelandic banks represents only a very small amount - less than 3% - of the total amount on deposit.

“The theatre project is well advanced and, as any impact is likely to affect longer-term programmes rather than nearer-term ones, we do not expect there to be any immediate impact on the project.”

Norfolk is hopeful that it will recover its £32.5 million, Bristol has said that there are no immediate threats to its operations, despite having £8 million tied up in the accounts and Sevenoaks District Council does not anticipate that its frozen £1 million deposit will impact proposals to reopen the Stag Theatre or any other arts provision.

Meanwhile, 13 councils are thought to be facing severe short-term difficulties and are working with financial experts. The LGA declined to reveal the troubled authorities, but according to press reports, they include Wyre Forest Council in Worcestershire, Uttlesford District Council in Essex and Tamworth Borough Council in Staffordshire.

National Campaign for the Arts director Louise de Winter said she was “very worried about the potential knock-on effects” of the collapse.

According to de Winter, councils are likely to be more cautious now in choosing where they invest their money and will select low-risk investments which deliver a smaller rate of return - a move that could impact how much money is available for services.

She added: “I would say that non-statutory bits of funding are always the first things that are axed - because councils are more likely to cut spending than they are to raise taxes. Capital projects might also be the most obvious thing that gets impacted, particularly if they are in the development stages.”

The LGA and Whitehall are in negotiations with officials from Iceland to secure the councils’ investments. A statement issued by Icelandic government described discussions as “friendly”.