Kent Council Financial Advisors warned Shepway that Iceland Investments were risky in 2007

9.00.00am BST (GMT +0100) Sat 25th Oct 2008

The potential loss of £50 million by Conservative Kent County Council of investments in Icelandic banks is under even closer scrutiny after news that KCC's financial advisers, Butlers, had advised Shepway Council that investments in Iceland were risky due to low liquidity in 2007.

Butlers act as advisers to both Kent County Council and Shepway Council. In a statement to Shepway's Corporate Scrutiny Committee on Tuesday, Shepway Council's Principal Accountant Gary Whittaker confirmed that Shepway had no investments in Icelandic accounts, and that they had had "informal advice" from Butlers in 2007 warning of the risk of Icelandic investments.

Kent have launched an investigation into their treasury management procedures. On Wednesday, Kent County Council's treasury management adviser, Butlers, decided not to accept an invitation to answer questions by Kent's cabinet scrutiny committee. Trudy Dean, Leader of the Lib Dem Group on Kent County Council, had called for representatives of KCC treasury advisers Butlers to appear before the Council's Scrutiny Committee on October 22nd.

Lib Dem Councillor Tim Prater, who Chairs Shepway Council's Corporate Scrutiny committee, has alerted Trudy Dean to the news that Butlers were warning other Councils of problems with Icelandic banks last year. Tim commented:

"Kent Councillors need to know if Butler's were giving conflicting advice to councils. The news from Shepway makes it clear that they were at least informally warning of risks many months ago.

"If Kent had been told their money was at risk, to leave it there was simply negligent.

"Kent has billions of pounds invested. They pay fortunes for advice on investing the money. The least Kent deserves is that their advice is consistent across all Councils. If Butlers had warned there may be issues with Icelandic banks, then they should have acted. If they didn't - but had done so to other Councils - Kent tax payers deserve to know why.

"We also need to know how this loss is to be covered. It's simply not logical to suggest no-one will lose out. Will Councils such as Shepway and Folkestone Town Council - who both use Kent's pension fund - be asked to make up the loss? Will Kent be making up the loss, and if so, where from?"