EALING Council is set to get £2million of investment back which was feared lost for good when the Icelandic banks collapsed three years ago.

The news comes as small respite as the council announced this week a further £30.8million worth of savings it will make next year to cope with government cuts totalling £85m. 

This month Iceland's Supreme Court ruled that British councils would be among the first to have money repaid. Ealing Council anticipates it will get the full £2million back which was invested in Icelandic bank Glitnir up until February 2008 and feared lost when it collapsed later that year.

The council, like most public organisations, holds money that it is waiting to spend in a range of banks, and aims to find investments that will give the best interest rates while sticking to strict guidelines. 

Councillor Yvonne Johnson, cabinet member for finance, said: "We're delighted the court has decided that councils should be the first to be repaid what they are owed, but it has been a long battle to get this far. 

"With the £85million cuts we're grateful for every penny."

Ealing was among 123 UK councils fighting to reclaim lost investments. The Local Government Association lead the legal battle, which used more extreme examples such as Kent County Council, which had £50million at risk, as test cases.

A council spokeswoman said: "Winning the court challenge means councils now have 'preferred creditor status' so will be the first to get their money back and will recover all they invested."

Cabinet members will consider early next year how the recovered funds will be spent.