Introduction: This letter is intended to be circulated cross-party throughout networks of local government councillors in England, Wales and Scotland in councils (approximately 240) affected by LOBO loans calling for action from the Local Government Association (LGA).
LOBO loans are a national problem, caused by failure to adequately regulate and monitor the financial system – and to protect councils and taxpayers from mis-selling and market abuse by powerful financial firms.
We are calling for a political solution, so that further taxpayer funds are not spent pursuing banks, brokers and advisors through the courts to attain justice.
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Open Councillor Letter to the Local Government Association (LGA) and Communities Secretary Sajid Javid
As elected councillors in UK local government, we the undersigned are deeply concerned with reducing the burden of debt interest repayments on our constituents to protect jobs and local services from further cuts.
In the context of austerity and mounting service pressures we are disappointed by the lack of interest shown by the LGA in investigating and pursuing the brokers, banks, and advisors complicit in the mis-selling of £15 billion of Lender Option, Borrower Option (LOBO) loans. These risky and expensive loans have been mis-sold to 240 UK councils – exposed by C4 Dispatches in July 2015, and were the subject of a brief CLG inquiry.
Recently, Northamptonshire County Council with £150 million in LOBO loans, some paying interest rates of 7-11% was forced to issue a s114 notice. We know other councils will soon follow.
LOBO loans are not a party-political issue. Hundreds of councils of all political colour across England, Wales and Scotland are affected by this scandal. Blame cannot be heaped upon council finance officers alone.
CIPFA, along with DCLG and the financial regulator FCA/FSA must take responsibility for a local government financial system which allowed City firms to game the procurement process at taxpayers expense, and acknowledge the failure of audit and scrutiny safeguards to intervene.
This was a scandal foretold. In 2009 following the Iceland banking collapse, DCLG called on the FSA to investigate and regulate Treasury Management Advisors, yet the financial regulator refused. The FCA must now take firm action to hold companies like ICAP and CAPITA to account for their role in pushing LOBO loans upon town councils in order to maximise commission profit.
We call upon the LGA to demonstrate leadership by investigating options for legal redress for councils struggling under the burden of high interest rates loans, mis-sold by powerful financial firms, which town halls are ill-equipped to fight on their own.
LOBO loan mis-selling affects Housing Associations, councils, universities and police and fire authorities, and a cross-sector redress scheme incorporating the various peak bodies should now be investigated as a matter of urgency.
To avoid costly future scandals, we ask the LGA to ensure DCLG and The FCA initiate a thorough investigation into the mis-selling of LOBO Loans to councils. We also demand that the systems governing the procurement, benchmarking and public and member scrutiny of financial services within councils are tightened considerably.
|Abhishek||Sachdev||Hertsmere Borough Council||Conservative Party|
|Mick||Scrimshaw||Northamptonshire County Council||Labour Party|
|Bob||Scott||Northamptonshire County Council||Labour Party|
|Sam||Tarry||Barking and Dagenham||Labour Party|
|Matthew||Brown||Preston City Council||Labour Party|
|Cllr. Brian||Silvester||Rope Parish Council||Other|
|Andy||Stamp||Medway Council||Labour Party|
|Dan||McDonald||Medway Council||Labour Party|
|Paul||Woodhead||Cannock Chase||Green Party|
|Keith||Lindsay-Cameron||Bath & North East Somerset||Labour Party|
|Julia||Richards||Brighton & Hove||Green Party|
|Tony||Mobbs||Northamptonshire County Council||Conservative Party|
|Rachel||Cooley||Northamptonshire County Council||Labour Party|
|Maxine||Fry||Carmarthenshire county council||Labour Party|
Posted in Action, Blog
One thought on “Open Letter on LOBO loan mis-selling to the Local Government Association and Communities Secretary”
It’s not just the “LOBO” element causing the damage – its the LONG TERM FIXED INTEREST quality. Exposes the borrower to the forward rate capital risk – which they have little chance of offsetting. Result – loss of creditworthiness/ability to borrow in future . So much better to borrow at floating rates – and shorter term – and I don’t just say this with the benefit of hindsight!!