COUNTY council bosses have defended the decision to put money in a failing Icelandic bank, claiming taxpayers would be £18million worse off without similar investments this year.

Lancashire authorities could lose £24million in the Landsbanki bank, which has been taken over by the Icelandic government.

Meanwhile, the Lancashire Telegraph can reveal Lancashire County Council still has £100million invested in foreign bank accounts.

Council chiefs have been criticised by unions for placing funds in “high risk” banks - but county council executive director for resources Adrian Cutts said only highly-rated, approved institutions were invested in.

County Hall invested £9million in Landsbanki, which would have been set aside for things like claims against the council or equal pay settlements for staff.

The loan is due to be returned in December, and Mr Cutts said he was still hopeful it would be returned.

He added: “There are two reasons to justify the investment: it brings money and keeps council tax down, but also it is less of a risk.

“We have a policy where investments are spread out. If it all stayed in one bank what if something happened to it?”

The council was looking “more favourably” on banks that have been guaranteed by governments, for example in Ireland, Mr Cutts added.

Eighty per cent of the county council’s £500million total investment portfolio is currently in British banks including Barclays, the Allied Irish Bank, Alliance & Leicester - taken over by Banco Santander last month - and a host of other building societies.

The £100million invested abroad includes French banks Credit Agricole and CIC, German bank HSH Nordbank.

The largest overseas investment is £10million in Dexia bank, which was recently guaranteed by the governments of France, Belgium and Luxembourg after its shares fell.

Blackburn with Darwen Council has an investment portfolio of £53million, it has been revealed.

The council, which was not hit by the Landsbanki fallout, invests £17.5million in UK banks, £10million in UK building societies, and £14million in Irish institutions. The remaining £11.5million is invested abroad.

Financial services director Denise Park said: “This is a carefully managed process and the council takes specialist advice on a daily basis.

“To minimise risk our investment is spread across an approved list of institutions based on credit ratings issued by our advisors.”