A liberal Democrat election hopeful today called on a council boss to resign over a controversial investment in an Icelandic bank.

Steve Guy, the party’s prospective parliamentary candidate for Wycombe, said Buckinghamshire County Council leader David Shakespeare had “overall responsibility” for its £5m investment.

The cash is still held by Landisbanki, which was taken over by the Icelandic Government as other banks fell in October.

The council has said it relied on independent advice in taking its decision in July to make the investment, with the hope of earning a high rate of interest.

Yet Mr Guy said Moody’s Investors Service “cut its rating on all the major Icelandic banks” in February.

And he pointed to an article in the Daily Telegraph from February titled “Is Iceland headed for Meltdown?”

His call came as another council leader last night said she was doing everything possible to get back £2.5m from Icelandic bank Glitnir.

Cllr Shakespeare is on holiday but his deputy blasted the call as “preposterous” and said accused Mr Guy is “making local politics” out of the issue.

Mr Guy said: “The decision to invest in Icelandic banks was made in July when there was clear evidence of problems within the Icelandic banking system.

“The controls and checks carried out by Bucks County Council were not sufficient for the amount of money being invested.

“It is the leader’s overall responsibility to ensure tax payers receive value for money.”

Mr Guy added: “Even, if the funds are recovered it is likely that substantial amounts of interest will have been lost.

“That is not acceptable to the local people I have spoken to, who quite rightly demand councillors keep council tax as low as possible in these tough economic conditions."

"There has been no apology issued and little recognition that mistakes were made.”

He said: “If no lessons have been learnt then the mistakes are likely to happen again.

“Therefore, it is now time that the council leader took full responsibility for the performance of the council.

“David Shakespeare should resign as leader and the full council should elect a new leader who can learn from the mistakes made by this administration."

But Cllr Chapple, deputy council leader, said: “It is a tremendous shame that Steve Guy is trying to make local politics out of an issue such as this.

“If that was the case there would be leaders resigning up and down the country in a vast number of councils that put money in Icelandic banks.”

Branding Mr Guy’s call “preposterous” he said the cash was invested when the bank had a “triple A” rating, The council had earned £28m interested in the last two years on £180m, he said, giving it vital extra cash to keep council tax down.

Cllr Chapple said: “To say that the investment had not performed as well as expected is ludicrous and he plainly does not understand how it all works.”

He said: “We can’t put it in a suitcase and put it under the bed. We have to put it somewhere and invest it wisely.”

Wycombe District Council was the other local authority in south Bucks to invest cash, £2.5m, in the country.

Its leader, Cllr Lesley Clarke, last night told members: “All legitimate steps have been taken in order to reduce any loss to the council.

“It’s still ongoing and there’s still a lot of work to do.”