Niace falls into Iceland trap

17th October 2008 at 01:00
Pounds 1.9m in education charity's reserves frozen in KSF account, leaving vital development work in jeopardy

The most influential organisation behind the promotion of adult education has become the latest victim of the credit crisis, with its Icelandic bank account - worth Pounds 1.9 million - frozen.

The cash - a quarter of the financial reserves of the National Institute of Adult Continuing Education (Niace) - is held on deposit at Kaupthing Singer amp; Friedlander (KSF).

The bank has gone into administration along with parent company Kaupthing, blaming its demise on the international credit crisis.

Niace said major campaign work - which has previously relied on funding from reserves - will have to be curtailed for the foreseeable future as it sets about restoring its battered finances. The charity recently appointed the Princess Royal as its patron.

The charity Cats Protection became the highest-profile victim of KSF's cashflow problems last week when it revealed that it had Pounds 11.2m with the bank, having decided to invest in 2005 when KSF had a high credit rating.

Alan Tuckett, director of Niace, told FE Focus this week: "Through no fault of our own, our ability to serve the public interest has been damaged."

Niace believes the money it has left would cover its liabilities, including pensions, and the need to have a float available to cover redundancies should it be forced to wind up.

While there is no danger of the body winding up or announcing redundancies, the ability to cover these potential risks has to be maintained at all times. This means reserves are now at the lowest level needed to keep Niace solvent.

Mr Tuckett said: "Adult learning in England is under enough pressure from the loss of 1.5 million places in the past two years without the banks making life even more difficult.

"The loss of Pounds 1.9m from its modest reserves will inhibit the kind of dynamic development work to which Niace is committed.

"We are currently committed to Pounds 1m for sponsoring the independent inquiry into the future of lifelong learning.

"Last year, we sponsored a similar exercise examining the future of English for speakers of other languages provision.

"Future initiatives of this sort will not be possible unless government recognises that charities which operate in the public interest, like Niace, have no freedom to recover resources through taxation."

In a statement to the bank's customers, Armann Thorvaldsson, KSF's chief executive, said: "I am personally gutted that it has come to this. I believe that we have built a great business over the past couple of years, and during this time I have worked with many of the most talented and professional people I have ever met. I am very sorry."

The bank said it had suffered an "outflow" of funds as British customers began to move their money elsewhere in the wake of the block on withdrawals imposed by Icesave and its parent company Landsbanki, which is also based in Iceland.

Deposits made by the bank's UK retail customers have been guaranteed by the Treasury.

Alan Bloom, a member of KSF's team of administrators at Ernst amp; Young, declined to comment to FE Focus.

Niace has joined other charities - including Cats Protection - in lobbying the Government for compensation following the crisis.

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