A WINDFALL of nearly £50million is now available to county council bosses in Lancashire after shrewd investment in government gilts.

The dividend should help to lessen the impact of the projected £179million three-year savings package currently being implemented across the county.

Councillors were told earlier this month that an extra £15million would be available to protect services - but a final review of interest returns on the authority’s investment portfolio has shown an additional £33million has been generated.

The authority’s financiers took a conscious decision to invest more heavily in government gilts, as a more secure investment option, in 2009.

This was in the wake of the demise of Icelandic bank Landsbanki - which held around £19million worth of county funds.

The phenomenon is known as the ‘flight to quality’, with large authorities and investors seeking cast-iron and mostly risk-free alternatives as part of their investment strategies.

In early January the county council’s cabinet will be asked to allocate £7million of the £33million to a ‘volatility fund’, to safeguard against future changes in the money market.

But the remaining £25million will be available for the executive to spend on priority areas in 2012-13 and 2013-14.

Mike Jensen, the county council’s chief investment officer, said: “It must be stressed that the financial benefit is exceptional, and has occurred in extraordinary circumstances. The scale of the flight to quality and increase in prices is almost unprecedented.”

County councillor Peter Britcliffe, who represents Oswaldtwistle, said: “This is great news and shows the excellent judgement of our leader Geoff Driver and his team at County Hall in making these investments in what are difficult times.”

* The ‘lost’ investment in Landsbanki is now being repaid and the majority is expected to be returned to the county coffers. The increase in gilts investment was from 20 per cent to 24 per cent of current holdings, estimated at £656million.