DISTRICT council chiefs have said they are confident that £1.5m of taxpayer’s money deposited in an Icelandic bank before the global credit crunch can be recovered.

The £1.5m took the form of a two year fixed term deposit with Landsbanki which was agreed in August 2007, before the banking crash in 2008 in which Landsbanki went into liquidation.

The Icelandic District Court has since ruled that local authority deposits such as Wychavon’s should have ‘priority status’ and at the last full council meeting on September 27 leader Paul Middlebrough revealed a decision from Iceland’s Supreme Court was expected later this month.

He said: “We have invested in a very responsible and prudent way and we are confident we will get that money back.”

Wychavon has maintained the money was a deposit and not an actual investment but other creditors are disputing this, forcing the Supreme Court to make a decision.

Vic Allison, the deputy managing director at Wychavon, said: “The Supreme Court in Iceland met on September 14 and 15 and we expect a decision from it in October.

“At this stage we remain confident in the strength of our arguments and believe the Supreme Court will uphold the decision of the Icelandic District Court which will mean we receive the lion’s share, if not all, of the £1.5m.”

Some district councillors have been critical of the ongoing dispute, claiming it has already cost local taxpayers £342,000.

But Vic Allison revealed this money was an ‘impairment figure’, ie. an accounting adjustment to reflect the risk of not being repayed the full amount from Landsbanki’s limited assets.

He said: “Asset values need to be discounted to reflect true value. We have prudently reduced the value of our investment by £342,000 in line with guidance. This is a prudent allowance and furthermore still expect to get most, if not all, of the money back.

“For the avoidance of doubt, this is an accounting adjustment and does not reflect actual costs or losses incurred by the council.”

He added legal costs have so far amounted to less than £10,000.