OXFORDSHIRE councils could get millions of pounds to invest or spend on capital projects after an Iceland Supreme Court ruling freed up their frozen assets.

The county and four district councils had £28m invested in Icelandic banks when they crashed in 2008. All the assets were frozen.

Now a test case ruling makes it likely that 145 councils across Britain will get back £1bn deposited in high-yield accounts.

West Oxfordshire District Council has £9m in Icelandic deposits, Cherwell District £6.5m, Oxfordshire County Council £5m, Oxford City £4.5m, South Oxfordshire District Council £2.5m and Vale of White Horse District Council £1m.

In a test case brought by 11 English, Welsh and Scottish local authorities, the Reykjavik court upheld legislation which put depositors first in line for compensation.

Oxfordshire councils told the Oxford Mail it meant they were likely to get their money back, but they did not yet know when.

Oxford City Council leader Bob Price said: “We still need to check out whether authorities like ours will be covered in the same way the test cases were, and find out exactly how much we will get back.”

He said if the money is ret-urned, the cash could be used to reduce capital borrowing or spend on city housing projects.

County council leader Keith Mitchell said he expected the £5m stuck with Icelandic bank Landsbanki would be returned in tranches over several years.

He said: “It could go into a capital project such as a school or a road scheme, but it will not fund youth services or library services because it is one-off money.

“Given the current state of the finances, if there is a bit spare we have to hang onto it for a rainy day, because it is going to pour down for the next years as far as I can see.”

The Cherwell district councillor responsible for finance, Ken Atack, said development projects in Banbury, including regeneration of the canalside and improving the town’s “cultural quarter” could benefit.

Simon Hoare, the councillor responsible for finance for West Oxfordshire District Council, said the £9m set to be recovered could be used to buy up commercial property which could then be rented to supplement the council’s revenue budget.

Vale of White Horse District Council leader Matthew Barber said: “The biggest hardship for the council and council tax payers was that the investment was generating income, and since the money has been frozen in the Icelandic banks we have not been receiving interest on it.”

South Oxfordshire District Council leader Ann Ducker said the £1.5m stuck in Iceland since 2008 would go back into the budget. “We will not spend it just because we have got our money back,” she said.

All the money invested within the Icelandic banks are within the council’s capital budgets, meaning it cannot be used to fund services.

Instead, it can be earmarked for building or infrastructure projects or used as investments, so that interest can help bolster the councils’ day-to-day spending.