Laura Sharman 22 July 2015

Councils failed to see risks of LOBO loans, MPs told

Councils were persuaded to take out £15bn in high interest loans despite no officers in local government understanding the risks involved, a committee of MPs have been told.

The Communities and Local Government Select Committee has heard evidence on the use of Lender Option Borrower Option (LOBO) loans by local government, following the damning investigation by C4 Dispatches. The programme revealed how 250 councils have taken up to £15bn in LOBO loans, with interest rates of more than 7% in some cases.

The Committee was told that some councils had paid brokerage fees of £25,000 in some instances, compared to £75 for the equivalent Public Works Loan Board (PWLB) loans.

Abhishek Sachdev, CEO of Vedanta Hedging, told the inquiry: 'I would categorically say I don’t believe you could find a finance officer or treasury officer in a council who could assess the risks and rewards of these LOBO products. Even FTSE 250 businesses wouldn’t be able to analyse these on their own.’

Debt Resistance UK (DRUK), who conducted the freedom of information request for Dispatches, said it was disappointed the Committee has not announced a fill inquiry into the matter but is instead allowing banks and brokers to submit written evidence in private.

Joel Benjamin of DRUK said: ‘Billions of pounds of taxpayer money is ultimately at stake here, with serious questions of impropriety to be answered. Parliament must fully scrutinise public sector borrowing from City of London banks and address conflicts of interest with the unregulated financial advisors that recommend LOBOs whilst accepting undeclared kickback payments from banks and brokers.’

DRUK is calling for a UK wide audit of local authority debts and a thorough regulatory investigation into the ‘systemic abuse’ of local authority finance by the financial sector.

‘This is not a campaign against local government', said Ludovica Rogers from DRUK. ‘It is a campaign to reclaim our democratic institutions from the clutches of the financial sector. We need to keep the pressure up and insist that our local authorities are run in the interest of their citizens and not the interests of the City of London.’

SIGN UP
For your free daily news bulletin
Highways jobs

Principal Transport Planner (Strategy)

North Northamptonshire Council
£46,731-£49,764
We are looking for an experienced professional to join North Northamptonshire Council as a Principal Transport Planner (Strategy). Sheerness House, 41 Meadow Road, Kettering moving to Haylock House, Kettering Parkway, Kettering NN15 6EY, United Kingdom
Recuriter: North Northamptonshire Council

Highways Capital Delivery Manager

South Wales Trunk Road Agent
£50,788 - £52,805
To be responsible for the implementation of Welsh Government’s Renewal and Upgrade programme. Baglan, Port Talbot
Recuriter: South Wales Trunk Road Agent

Senior Engineer x 2

Hounslow London Borough Council
£47,532 –£55,620 per annum
Our people are deeply committed to providing excellent services to our residents, doing all we can to make lives as good as they can be. Hounslow (City/Town), London (Greater)
Recuriter: Hounslow London Borough Council

Part Time Prison Library Assistant - HMP/YOI Chelmsford

Essex County Council
£25081.00 - £27653.00 per annum + Pro Rata
Part Time Prison Library Assistant - HMP/YOI ChelmsfordFixed Term, Part Time£25,081 to £27,653 Per Annum, Full Time EquivalentLocation
Recuriter: Essex County Council

Head of SEN Assessment & Resolution

The Royal Borough of Kensington & Chelsea Council
£77136 - £88230 per annum
Shape a fairer future for children with special educational needs.As Head of SEN Assessment and Resolution at the Royal Borough of Kensington and Chel England, London
Recuriter: The Royal Borough of Kensington & Chelsea Council
Linkedin Banner