WORKERS at a council which has £5 million invested in Icelandic banks are to be paid on time.

The pledge from Jeanette McGarry, the chief executive of East Staffordshire Borough Council, came as she also assured council tax payers that services would not be affected.

It emerged last week that the council had £3 million invested in the failed Icelandic bank Landsbanki.

Three deposits of £1 million each are due to mature in 2009 and attempts are being made to recover the cash.

The council also has £2 million invested in Singers, another Icelandic bank, and is 'seeking clarification' on any further action needed.

The borough council – which serves Uttoxeter and the surrounding areas – admitted a week ago that the cash was in three different accounts with the failed Landsbanki.

Mrs McGarry told members of the cabinet on Monday that they had no need to worry.

She said that, unlike other councils across the country that had also invested in Icelandic banks, they would be able to honour staff wages.

She said: "Let me reassure you that East Staffordshire Borough Council is able to meet its short-term requirements and will be able to pay its staff fully and on time.

"This is a rare situation that we, along with many local authorities, have been placed in. However, we are resolute that East Staffordshire Borough Council will do everything in its power to ensure that the local services will be not affected in any way, and to ensure the interests of our residents are protected."

Mrs McGarry said that East Staffordshire Borough Council had in place a "well structured and prudent treasury management policy".

She said the policy followed the Chartered Institute Of Public Finance Accountants guide for treasury management, and was developed in conjunction with SECTOR, the council's treasury management adviser. Mrs McGarry said: "Our treasury management policy ensures that East Staffordshire Borough Council is exposed to minimal risk, while still ensuring a return on the investment.

"The policy contains a list, which details who the authority can deposit with, how much in total we can deposit with them, and what their credit rating is.

"This list is continually updated as and when transactions are made, and when organisations have their credit rating altered, with information being issued by SECTOR as and when changes occur.

"This was the case with respect to Icelandic banking institutions, with notice only being given just days before the Icelandic Financial Services closed these organisations.

"If an organisation drops below the required threshold, then they are removed from the list and we cannot do business with them.

"It is by using this system that the authority has been able to be prudent and has always acted within Government and Treasury guidelines."

The Local Government Association has identified more than 100 local authorities with a total of £858 million invested in the banks.

It met with Local Government Minister John Healey on Wednesday as efforts continue to recover taxpayers' cash.