Until recently, Calderdale Council had £4 million invested in a bank in Iceland.

But it took the money out as soon as finance officers spotted the danger signs.

"I want to praise our head of finance, Peter Smith, and his staff who took this decision – their cautious approach and swift action prevented us facing huge financial problems," said Coun Baines.

"I just goes to show that you shouldn't have all your eggs in one basket."

Mr Smith said £4 million had been invested in a bank in Iceland but was withdrawn in February after its international credit rating was downgraded from A to B.

"We always keep our eye on the ratings and take a cautious approach which in this case seems to have paid off."

Mr Smith said when investing money it wasn't wise just to look at the headline figures.

"You need to put it where it is going to be secure," he said.

The council puts money for short periods in as many as 20 different banks at any one time and has very strict rules about which ones to use.

Up to £10 million can be deposited for up to a year with HBOS, HSBC, Barclay's, Lloyds and the Royal Bank of Scotland.

This is money from the Government, council tax payers or the sale of assets which is waiting to be spent on building and improvement projects, as well as council services.