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New evidence from a Parliamentary inquiry has shown just how reckless Westminster Council’s investment policy was in the months before Icelandic banks collapsed and froze £17m of Westminster Council taxpayers’ money.

Independent consultant on local government Howard Knight has been conducting a survey of councillors responsible for finance in a representative sample of councils. He told the Communities and Local Government Committee he had found only one other council where, like Westminster, councillors had pressed for more risky investments - but unlike Westminster, they kept an eye on the market and quickly decided that “things were getting difficult” early in 2007, and then changed back.

Councillor David Boothroyd, who opposed Westminster’s decision to adopt a riskier investment strategy in September 2007, said:

“Howard Knight’s survey makes clear just how reckless Westminster Conservative councillors were with Council taxpayers’ money. Just at the point that banks were beginning to fail, they were rushing to the more risky ones - and it seems they were almost alone in doing so.”

Knight also said that councils which lost long-standing investments in Icelandic banks might claim there was no hint the banks were in trouble, but that it was “not satisfactory” to use that excuse for investments made shortly before the banks collapsed.

Councillor Boothroyd added:

“The time has come for Leader of the Council Colin Barrow to explain why he didn’t warn the Council off, given that he works in investment management. Did he not realise the market was thinking Icelandic banks very likely to default on debts only weeks before the Council sent £10m of taxpayers’ money?”