COUNCIL CREDIT AGENCIES UNDER INVESTIGATION

3.26.00pm BST (GMT +0100) Thu 23rd Oct 2008

£30 MILLIONS MORE TAXPAYERS MONEY AT RISK

Just hours after the cabinet decision on a new investment strategy at yesterday's cabinet meeting, the American credit agencies used by the cabinet were being investigated. Their chief executives are being questioned under oath about the agencies failures and the unreliability of their credit ratings that are leading to investors risking millions of pounds.

Yesterday's cabinet meeting announced the County Council will rely on the same credit agency ratings for advice on the safety of £30million of new council investments. The American credit agencies the council's cabinet has faith in are called Moody, & Fitch.

These agencies are the same credit agencies the council relied on for the £12million investments in Icelandic banks that are currently at risk.

Councillor Jeremy Hilton said: "The news yesterday makes grim reading for taxpayers in Gloucestershire. The cabinet yesterday nodded through a new investment strategy that puts millions more of Gloucestershire taxpayers money at risk. There was no discussion, no assessment of the risk and no detail of where the money will be invested. Gloucestershire made the same mistake as many other councils with the Icelandic banks and people in the county are already at risk of losing £12million. Now the council's cabinet has launched head-first into making new investments of up to £30million of taxpayers money. We believe the council must take immediate action to prevent more money being put at risk. An immediate cross-party inquiry must be arranged to oversee the council's investment strategy. The council must order an emergency cabinet meeting to place safeguards on the new investment strategy. The cabinet must take independent financial advice on the safety of the new investments to avoid relying on the credit agencies that are now under investigation."

The council new investment strategy is to rely on putting money into so-called "money market funds". These are rated by the two agencies under investigation which the cabinet relies on as "AAA" ratings. This is supposedly the highest credit rating available. However, these are the same agencies and with their ratings which advised councils nationwide that investments in Icelandic Banks were safe.