West Sussex County Council could get back money lost in Icelandic banks

The first payment could be made as soon as July and August.

The announcement comes in the wake of a report by accountants Ernst and Young, appointed after the bank, Heritable, went into administration following the September, 2008, collapse of its parent company, Landsbanki, based in Iceland.

The report makes a cautious assessment that investors could start to plan now for receiving the first 70 per cent of their money back.

Cllr Louise Goldsmith, the county council cabinet member for finance and resources, said: "It is welcome news. We will now be planning our forward programme for 2010/2011 on the basis that we will secure around 9m back.

"I remain confident that we will see more of our original investment of 12.9m being returned. The administrators may have spoken about creditors only securing 70 to 80 per cent of the investment, but they have to err on the side of caution.

"Heritable is still trading and making money, so the prospects of a better return are in place."

Cllr Goldsmith said the loss of the money was always going to be 'temporary'.

She added: "It has had no impact at all on services or council tax in the current year, and West Sussex was just one of many local authorities, together with other public bodies and charities, to have invested in Heritable UK.

"Before placing our investment, we followed all Government guidelines and took proper professional advice.

"The failure of a British-regulated bank is something that would have been unthinkable 12 months ago.

Even the local government watchdog, the Audit Commission, had money invested with Heritable.

"It is also important to stress that the Audit Commission carried out its own independent review and concluded that we had not been negligent.

"We have a duty to get value for money for council tax payers for the reserves we hold and in the previous three years we have received almost 7m more than we budgeted for - including 3.5m last year alone.

"That money can be invested in services and help keep the council tax down in the long term."