It’s a busy autumn after a summer break, and we need your help again!
One of the most important strategies in our work on LOBO loans has been supporting residents to submit objections to the loans locally. The right to do this (as well as the right to inspect council accounts) is granted by a piece of legislation called the Local Audit and Accountability Act. The collective action of submitting objections has helped to bring attention to LOBO loans. Unfortunately, we and our networks have found that it rarely works in our favour, as auditors are reluctant to take residents’ concerns seriously and councils all too often try to wiggle out of their responsibility to provide access to information.
We are now gathering these experiences into a report, which we will launch in the next months. This is a crucial time to be voicing our concerns, as the government recently announced an independent review into the local government audit regime, including the LAA Act.
If you have inspected your council’s accounts, asked a question to the auditor or objected to spending you believe is not in the public interest (be it LOBO loans or something else), please help us with our evidence-gathering by responding to this questionnaire. Please also share the questionnaire with anyone else who you know has used the Act. Click here to send this suggested tweet:
Have you inspected your council’s accounts or objected to spending not in public interest? Share your experience with @Research_Act for their upcoming report: http://bit.ly/Q-LAAA
For more information about the rights guaranteed under the LAA Act, see our guide. Below are other things we have been up to or would like to let you know.
Edinburgh exits toxic ‘inverse floater’ LOBO loans
This week we heard some great news from Edinburgh: the council has exited its four inverse floater LOBO loans. Inverse floaters are the most toxic loans of the LOBO family, as their interest rates are inversely tied to market rates. This means that when interest rates are low, like now, inverse floater rates are high and councils like Edinburgh have been paying nearly 8 per cent interest. This compares to Public Works Loan Board rates that until recently have been around 2 per cent.
Thanks to Councillor Gavin Corbett, who raised the issue at the council’s Finance & Resources Committee, Edinburgh City Council has now terminated the loans with RBS. Corbett, who leads on finance for the Edinburgh Green Councillors group, has written an excellent analysis for CommonSpace on the process and the remaining challenges – Edinburgh still has 18 LOBO loans of other types.
If you are a councillor and would like to take action on LOBO loans, get in touch and we can support you. You can also sign an open letter calling for action on LOBO loans from central government and the Local Government Association.
Risky Finance report on LOBO loan restructurings
More and more councils are restructuring LOBO loans. Nick Dunbar, who as a consultant for Vedanta Hedging helped negotiate Newham Council’s early exit from RBS inverse floater LOBOs, has published a report on his website Risky Finance (paywall) that explores the refinancing terms, including why some banks are offering discounts on councils’ exit fees.
Cancelling LOBO loans is of course great news, although we would rather see the exit fees waived altogether as we believe the loans are illegitimate.
The Public Works Loan Board hikes interest rates by 1% overnight
Many councils have refinanced their LOBO loans by borrowing from central government via the PWLB at historically low interest rates below 2%. However, this week a percentage point increase in the rate for a PWLB 50-year new maturity loan was announced, raising rates from 1.81% to 2.82%. The move comes following a rapid increase in borrowing by local authorities for commercial property investment due to the record-low rates offered.
The PWLB rate increase will have a direct impact on the sustainability of local government finance already hit hard by central government cuts, penalising poorer urban councils with greater need for borrowing to fund housing development. You can read more about the impact in this Room151 article.
The move will also expose councils to greater market risk as it pushes them to borrow more from the private sector and bond markets and makes it more expensive to refinance LOBO loans and PFI contracts. The increase mirrors a previous PWLB rate hike in 2010 by George Osborne, which prompted the increase of LOBO loan borrowing from RBS.
Select Committee publishes findings of Local Government Finance inquiry
Parliament’s Housing, Communities and Local Government Committee published the findings of their Local Government Finance and Spending Review 2019 inquiry in August. The report adds to the evidence that funding cuts and uncertainty about future funding have “left council services at breaking point” and the “social care system on verge of collapse”. It identifies a £5bn funding gap and recommends increasing funding to local government to guarantee service provision, especially in social care: “If HM Treasury wants local government to continue providing the services it currently does it needs to provide local government with a significant real-terms increase in its spending power.”
We submitted evidence to the inquiry, stating that the current funding regime is not fit for purpose and calling for increased central government funding, better oversight and protecting services for the poorest and most marginalised. Our evidence is online with the other submissions.
Solidarity with Rojava
This week, the US announced the withdrawal of protection from the northeastern Syrian region that since 2012 has been de facto autonomous. The announcement opened the door for Turkey’s long-prepared attack on the predominantly Kurdish region, known as Rojava.
What is at stake is perhaps the most inspiring democratic revolution of our times that has risen from the ashes of a brutal war and defeated ISIS.
Rojava follows a democratic confederalist model based on assembly democracy: communes consisting of under 100 families make decisions at neighbourhood level, and send delegates to city-level and canton-level assemblies. In addition, there are issue-based committees for example for education, health or the economy. In this way, a democratic non-state model governs a multilingual, multi-ethnic area with a population of 4-5 million (also refugees participate in assemblies). In addition to direct democracy, central pillars of the revolution are ecology and women’s liberation – women hold at least 40 per cent of elected offices, and administrative positions are co-chaired between men and women.
We stand in solidarity with the Rojavan revolution and encourage everyone to join the demonstrations in your cities against the Turkish invasion. We will be joining the one in London on Sunday 13 October at 1pm in Portland Place.
To learn more about Rojava, we recommend the following:
David Graeber speaking to Novara Media this week about the philosophy behind the Rojavan revolution and why Turkey wants to destroy it
Steve Rushton arguing in Equal Times that our support is crucial for the democratic project that provides answers to the crises of capitalism, February 2019
Glasgow’s Debt, Glasgow’s Future
12 October, 12-4:30pm, Centre for Contemporary Arts, Glasgow, G2 3JD
We have been invited to Glasgow to speak about LOBO loans at an event that starts to imagine alternatives to a neoliberal city and its finances. Glasgow is one of the councils with most LOBO debt, with 22 loans totalling £449m.
The event is organised by SANE (Solidarity Against Neoliberal Extremism), whose Critical Citizen project is drafting a “Humanifesto” for the city’s next local elections. Other speakers include Ellie Harrison from Get Glasgow Moving and Neil McInroy from CLES.
Experimental Recipes for a Radical Municipalism
Fanny also participated in a day-long session called “Experimental Recipes for a Radical Municipalism” at the annual conference of the Royal Geographical Society in August. The inspiring day consisted of sessions on local democracy, overcoming barriers and scaling up urban commons – we spoke about our work on citizen debt audits, as tackling the power of finance is key to any project on local democracy. A short description of our session is here.
Lauriston Lights workshop for young people
Back in August, Fanny did a workshop on local government at a summer school for 11-14-year-olds in Bow, East London. The charity Lauriston Lights organises a two-week summer school for children from socio-economically disadvantaged backgrounds. Mentors, who are university students, help the children to achieve their potential academically but also personally. It was a pleasure to teach bright and engaged young people how a council works, where it gets money from and how they can influence things. Developing local democracy from the bottom up!
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