West Yorkshire Police and Kirklees Council have both confirmed they have money in Icelandic bank accounts.

West Yorkshire Police Authority said it had £6m invested in Icelandic banks.

A spokesman said: “We have taken care, in accordance with national guidelines, to spread the risk of any investments in accordance with the authority's approved investment strategy which places security above return.”

Chancellor Alistair Darling has guaranteed private savings with Icelandic banks, but has stopped short of guarantees for local authorities.

This could have an impact in Kirklees, where the council has deposited £1 million in Landsbanki, one of Iceland’s major banks which has been taken over by the Icelandic government.

Kirklees Council has moved to reassure taxpayers their money is safe, despite the £1m deposited in Iceland.

Councillor Andrew Palfreeman, said: “It is due to be repaid in 2009. The Icelandic government has said the bank will run as normal, so we will expect the investment to be re-paid and will be working to secure that.”

Bradford Council is not among the other dozens of local authorities which have deposits with banks such as Kaupthing Edge, Icesave and Landsbanki.

Fears are now growing that, should other banks go the way of the Icelandic institutions, the money could be under threat.

Councillor Ian Greenwood, Bradford Council’s labour group leader, is chairman of the West Yorkshire Pension Fund, which looks after more than 200,000 council employees in Bradford, Leeds, Wakefield, Kirklees and Calderdale.

He said money from the £300m fund was put into “dozens” of banks on a short-term basis, and decisions were reviewed on a regular basis.

Coun Greenwood said: “We have a list of banks with whom we deposit on a short-term basis and it is no more than £30million at one time.

“Every quarter we receive a report that outlines the amount of money in each area and we are always reviewing the banks. Money is held in dozens of banks – there will be so much in HSBC, Citibank, Lloyds TSB, Abbey-Santander and major international banks.”

The Council’s Liberal democrat leader Jeanette Sunderland has called on the Government to guarantee local authority deposits in the same way as individual investments.