Hertfordshire County Council has invested £17 million in Icelandic Bank Landsbanki and Heritable, it has been revealed.

The news was greeted with dismay by Chris White, leader of the county council's Liberal Democrats, who said: "This is rather grave news. The amount involved is seven per cent of the adult care budget.

"And who knows which other banks are fundamentally in trouble?"

On Tuesday it was announced Landsbanki, Iceland's second largest bank, had gone into receivership, causing uncertainty for hundreds of thousands of savers.

The 300,000 British customers of internet bank Icesave, which is owned by Landbanski, had their deposits frozen.

Councillor White is now calling for the deposits of institutions, including councils and charities, to be protected alongside personal deposits.

He said: "It is clear that there needs to be a guarantee for individual people's savings. But council services can be just as vital to many members of our community.

"I believe the county council is working with advisors to minimise the loss. We will give them every political support in this."