RESIDENTS of a borough whose council pulled £2million out of a collapsed Icelandic bank could still be hit in the pocket.

Hyndburn Council bosses have revealed their finances could now be hit by missing out on the high interest rates Landsbanki offered.

The cash is instead being put into Irish banks where the money is ‘safer’ but the returns are less, they said.

Council leader Peter Britcliffe said warned the shortfall could lead to council tax rises in the next financial year and cuts to some of the borough’s services.

But Coun Britcliffe, during the Hyndburn Council cabinet meeting at Scaitcliffe House, said they would work hard to prevent this happening.

Hyndburn tax payers’ money was moved from the Icelandic bank following the Northern Rock crisis earlier this year into Irish accounts to keep following advice from its financiers.

Coun Britcliffe said: “We have done an excellent job as a council but this may affect increases in council tax somewhere along the line and service cuts but we will work hard to alleviate this.

“We have taken less risk but the interest rates are not as high as in Icelandic banks so there is less money coming in from interest rates and these monies have to be made up.”

Last week it was revealed that £13million of Lancashire councils’ cash was at risk after being invested in Landsbanki.