Introduction: This letter is intended to be circulated cross-party to MPs and throughout networks of local government councillors in England, Wales and Scotland in councils (at least 2o0) affected by LOBO loans. The letter is calling for action from the Local Government Association (LGA), Ministry for Housing, Communities and Local Government (MHCLG) and HM Treasury (HMT).
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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If you are a local resident, ask your MP and councillors to sign the letter. You can get in touch with them by using the WriteToThem website.
Open Councillor Letter to the Local Government Association (LGA), the Ministry for Housing, Communities and Local Government and HM Treasury.
As elected MPs and 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 more than 200 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 MHCLG and the financial regulator, the FCA, must take responsibility for a local government financial system which allowed City firms to game the procurement process at taxpayers expense and acknowledge and address the failure of scrutiny and external audit safeguards.
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.
Councils have been left alone to challenge the financial sector over LOBO loans and to date, litigation by 15 councils has been restricted to banks RBS and Barclays in relation to LIBOR rigging, ignoring the universal mis-selling issues perpetrated by CAPITA and Butlers.
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 MHCLG 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.
Constituency or Local Authority
|Sam||Tarry||Labour Party||Councillor||Barking and Dagenham|
|Matthew||Brown||Labour Party||Councillor||Preston City|
|Martyn||Rawlinson||Labour Party||Councillor||Preston City|
|Paul||Woodhead||Green Party||Councillor||Cannock Chase|
|Keith||Lindsay-Cameron||Labour Party||Councillor||Bath & North East Somerset|
|Julia||Richards||Green Party||Councillor||Brighton and Hove|