London Stadium Report & LOBO legal action: Newham Full Council Meeting 16.7.18

Tonight's Newham Full Council meeting was dominated by two key announcements by Mayor Rokhsana Fiaz in her report to Council.

Firsty, she announced the result of a QC investigation on the London Olympic Stadium debacle where Newham Council lost at least £54 million in a failed investment in the stadium. 

Why did Newham go ahead with the original £40 million investment when even our financial advisors warned against it? Full report published tomorrow.

Secondly, the Mayor announced that Newham Council is pursuing legal action against Bank(s) over the selling to us of toxic LOBO loans, which is separate to the Court challenge announced by 14 other local authorities yesterday. Matter now "sub judice".

Not often I can say this but today was in my view a great day for Newham. Getting to the truth, holding people and institutions to account, seeking justice, learning from what has gone wrong while standing up for the interests of our residents. 

The speech that never was - West Ham Ward Labour Councillor selections 2018

Since on Saturday I was affirmed by West Ham ward members as a Councillor candidate for May, I was not able to give my speech - so will blog it here instead :)

"My name is John Gray and I have lived in Newham for the last 30 years and have been honoured to be a Newham Councillor in West Ham ward since 2010.

· Even though I am seeking a 3rd term as your Councillor the reason why I am standing here today is that I want to be a change candidate in Newham for the next 4 years. While we have done many fine things as a council over the years, we desperately need fresh political leadership and a fresh approach.

· Not only at the top of the Council but also amongst backbench Councillors. The directly elected mayoral system gives such mayors huge powers and they must be held accountable by Councillors brave enough to stand up for their constituents, regardless of the consequences.

· For example, I have been a supporter of the London Living wage foundation since it was founded in 2001. It is completely unacceptable that we still have 17 years later, hundreds of workers employed as agency or in house contractors, providing Newham Council services on poverty pay. Doing often dirty, hard, manual labour for a measly £7.50 per hour, compared to the £10.20 per hour, the Living Wage Foundation thinks is the absolute minimum to live on in London. Not only do they have rubbish pay, but they are on insecure zero hour contracts, no pensions, no company sick pay. They are even forced to opt out of the working time regulations, so they can be even further exploited.

· We need proper financial checks and balances in place in Newham Council to stop the continuing financial governance problems such as the £530 million we have committed to 50-70 year toxic derivative LOBO loans and £60 million of Newham resident’s money wasted down the plug hole on the London Stadium.

· At the moment Newham Council officers are going up and down the country buying car parks, warehouses, shopping centres in order get money to try and offset government cuts in our grants to councils. I understand the need and lay blame with for the cuts where it lies – which is this thieving tory government but if we are going to borrow billions of £s, where are the checks and balance in place to make sure that this money is invested wisely?

· As a founder member of “Newham against Austerity” I want to support our Schools to remain in the Newham family of Schools and campaign against all education cuts.

· I want to bring back in-house the management of the many outsourced Council Services, stop the use of bailiffs by the Council against the poor and vulnerable and the Council to sign the Ethical Care Charter.

· We need to build decent homes at social rents not homes for private market rent.

· We desperately need better youth services to stop gang and knife killings, we also need accessible citizen advice provision across the borough.

· I work in social housing , a school governor, Pension and Charity trustee and UNISON trade union activist (and member of its National Executive Committee)

· I have been Lyn Brown MP Parliamentary agent for the last 3 General elections & Vice Chair campaigns of West Ham CLP.

· Please also support my Councillor colleague John Whitworth. We have worked together as a team to stop the 40% rent rises of housing association key workers and working with branch members, we persuaded the planning committee to tell the Ford Show room’s developers to get lost until they change their plans and provide far more social housing homes for rent. John and I have been leading the campaign in Newham to call Executive power to account and support Mayoral candidate, Rokhsana Fiaz, in her call for a referendum on the future of the directly elected mayoral system in Newham.

Thank you for your time and hope that I have earned your trust to be your candidate.

"Newham declines FOI request for LOBO replacement loan rate"

This is really disappointing news. We are being ripped off by the Banks over our LOBO loans left, right and centre.  This is a national issue not only a Newham issue.

Last night the BBC televised allegations that the Bank of England had been involved in manipulating the Libor rate, which would have impacted negatively on many Newham LOBOS.

Perhaps we should be suing the Bank of England? I don't know to be honest but I do know that we need to find out what is actually going with these loans, be open and transparent and then find a solution.

BY COLIN MARRS
IN 151 NEWS · TREASURY
— 5 APR, 2017

A London council has refused to reveal the rate it is paying on £248.5m of fixed rate borrowing which it has converted from Lender Option Borrower Option (LOBO) loans.

Councillors at London Borough of Newham made a freedom of information request following the council’s announcement in February that it had renegotiated the terms of the LOBOs. The council said that it has saved £94m on interest rates which would otherwise have been payable on the loans. 

But it has rejected a call for clarity on the new fixed rate it will pay. In its response to the FOI request, the council said: “The information requested relates to the specific rate of interest which was negotiated in securing this new financial arrangement.

“Having consulted with the relevant financial institution we consider that in disclosing the fixed interest rate agreed, would be likely to weaken Newham’s bargaining position during future financial and contractual negotiations.

“This could potentially affect the council’s income and budget and essentially, the availability of financial resources for residents and in the delivery of Newham’s services.”

Barclays’ bargaining power on similar or related restructuring processes could also be weakened, the council said.

Newham recognised the public interest in promoting transparency, but said that maintaining the exemption outweighed the public interest in disclosure.

Councillor John Whitworth, which helped submit the FOI request, told Room151: “The executive is being secretive, as it is in all things. It is very difficult for backbench councillors to get information.”

However, he said that disgruntled councillors will continue the fight for information on the financial arrangements relating to the renegotiated LOBOs.

The FOI revealed that the councils were advised by treasury advisers Sector and Butlers on its LOBO loans portfolio.

It also said that Allen & Overy had provided legal advice while JC Rathbone & Associates and Ernst & Young had provided independent financial advice on the deal.

No fees were paid to brokers carrying out the LOBO deals, according to the council’s response.

Nick Dunbar, founder and editor of the Risky Finance website, was sceptical about the latest deal. He said: “Given that most of Newham’s Barclays LOBOs were of the highly complex ‘range LOBO’ variety with rates currently as high as 7.6%, it might have been a more fruitful strategy for the council to have disputed the entire break cost on the grounds that the products were mis-sold.

“Instead, the council has seemingly absolved Barclays of legal risk while committing to paying crippling interest rates for 50 years or more.”

LOBOs "Newham to save up to £94 million on its debt portfolio"

Well I never. Hot off the press. I will ask for further details (it is inaccurate in some respects) but I am really happy that it appears that some of the problems with LOBOs can be sorted.

"Newham Council could save up to £94 million in future after the council’s Cabinet today (Thursday 16 February) agreed to restructure its market debt with a major high street bank.

The decision enables the council’s director of financial sustainability to strike a new deal with the bank that will switch their structured loans (otherwise known as Lender Option Borrower Option or LOBO loans) into normal fixed rate loans.

The deal also takes the ability away from the bank to change the interest rate levels at regular intervals over the remaining lifetime of the loans. The new financial agreement will save the council up to £1.6 million per year on interest payments on these long term loans.

This new deal will improve the council’s credit position thereby reducing the cost of future borrowing. Moreover, it will further stabilise the council’s future debt costs helping to safeguard council tax from future increases and protecting council services.

The agreement was made following lengthy negotiations with the bank. The market conditions are now right to strike this this deal which will deliver a clear financial benefit to the council.

The new deal is in line with the council’s Treasury Management Strategy, which reviews how much the council can afford to borrow and constantly monitors opportunities for restructuring or refinancing existing council debt where there is a clear benefit in doing so.

The council borrows money to carry out works such as improving the borough’s roads and to fund long term assets like buildings, such as schools, or bringing homes up to a decent standard. Government regulations meant that we cannot use long term loans to run services.

In 2007, Newham Council refinanced some of its debts to take advantage of lower interest rates available, at that time, through a series of long term loans from banks.

Previously the council was paying in excess of 10 per cent on its loans with the Public Works Loans Board, which lends government money to councils. These loans helped to refinance this expensive debt saving the council nearly £11 million to date in interest payments.

For further information, please contact Deborah Hindson, director of financial sustainability...

LOBO Local Finance Hackathon - 14 January

please register here: http://bit.ly/LOBOHack2 

Through hundreds of Freedom of Information requests, Debt Resistance UK have obtained a dataset of LOBO loan contracts. These are risky and expensive loans miss-sold to local authority by financial institutions, to the detriment of public services.

We've already processed much of the information, but by opening it up to others we can realise its value. So join us on the hack day, to make new analyses or visualisations, to help complete the dataset or just to get to know others working on pressing issues in local finance. 

All of the data will be published online. Some is already there. See the council of Newham as an example: http://lada.debtresistance.uk/local-authorities/newham/

People with all kinds of skillsets are welcome. We will provide clear step-by-step guides on how to participate for those who prefer it.

The hackathon will be run online so you can participate from any part of the country as long as you have an internet connection. People in London are getting together at Newspeak house in Bethnal Green.

Please join if you are up for it and spread the word!

DATE AND TIME

Sat 14 January 2017

11:00 – 19:00 GMT

LOCATION

Newspeak House

133 Bethnal Green Road

E2 7DG

please register here: http://bit.ly/LOBOHack2 

"Residents Launch Legal Objection to Bank LOBO Loans at 24 UK Councils"

This report by debt resistance shows that the LOBO loan scandal is a national issue and local authorities must take action to protect residents from being totally ripped off by the Banks.

 

"Local Residents Lodge Legal Objections to LOBO Loans at 24 Local Authorities Demanding Public Interest Reports and High Court Strike Out Residents of more than twenty local authorities around the UK have mounted legal objections to risky council borrowing from banks, calling for public interest reports by council auditors, and requesting High Court declarations that controversial Lender Option, Borrower Option (LOBO) loans are “irrational” expenditure, and therefore unlawful. In an unprecedented, nationwide action, the 24 objections lodged by residents throughout July and August under the 2014 Local Audit and Accountability Act force council auditors (PwC, KPMG, Deloitte, EY, BDO, Grant Thornton) to investigate why councils chose to take out risky, derivatives laced loans from banks at high interest rates, when they could have borrowed directly from Government, with significantly less risk? (go here for live links) A local objector who has requested remain anonymous said: “The use of Lender Option Borrower Option instruments without appropriate justification compromises the work of s151 officers. They should exercise more prudence to the risks that they are exposing local authorities to. The only people who lose out so far in these arrangements are current and future taxpayers. They only way out without incurring more municipal debt is higher taxes or reducing services” External auditors will effectively mark their own homework at these Councils, after Eric Pickles closed the Audit Commission in March 2015, as part of his package of ill-considered austerity cuts. Commenting for Debt Resistance UK (DRUK), researcher Joel Benjamin said: “UK local government finance is completely unregulated, so it’s great to see local residents around the country taking action, demanding accountability over how billions of pounds of public money is spent. For the past 6 years, councils have been passing down savage cuts to the poorest in society, using bailiffs to violently recover debts from the working poor, claiming they have “no other option.” Debt Resistance UK research shows councils do have options, but councils are instead making the political choice that citizens wear the costs of the banking crisis, not the banks that caused it.” Debt Resistance UK are calling for full transparency over how public money is being spent and an end to CAPITA lining their pockets through fraudulent financial advice at the taxpayers expense. A significant proportion of the £15 billion in LOBO Loans taken out by councils amounts to “irrational expenditure” and should be cancelled, freeing up councils to refinance at lower rates of interest, making funds available for social housing and maintaining public services.” Legal objections raise the prospect of High Court legal battles, rekindling memories of when Hammersmith and Fulham and 137 other UK councils in the 1980’s took out speculative  interest rate swaps from US and UK banks. Hammersmith residents complained to the Audit Commission and a series of legal cases ending in the House of Lords, ruled the swaps contracts to be ‘ultra vires’ or illegal, because councils should not be speculating with public money. The deals were torn up, and the debts cancelled. Ludovica Rogers from Debt Resistance UK added: "When central and local government fail in their duties to act in the public interest, citizens are forced to use all democratic tools at their disposal to hold those in power to account. Local residents are now exercising their democratic rights granted by the Local Audit and Accountability Act to expose serial failings in the management of public finances, and we demand these concerns are taken seriously and acted upon." Of particular concern are the legally suspect “range LOBO” product offered by Barclaysand “inverse floater” LOBO loans sold by RBS. These loans were effectively crystal ball induced bets on interest rates by banks and council finance officers, loans now costing councils 7-8% in annual interest, when base rates are near zero, and loans from the Public Works Loan Board are available for less that 2%. In practice, this means councils like Newham London with £573m in LOBO loan bank debt now find that the equivalent of 80% of their council tax revenue is eaten up by debt interest repayments. Repayments on debt interest at Newham Council (refer to chart below) now make up a greater component of expenditure than housing. 240 Councils around the UK now find themselves trapped into LOBO loans, with breakage costs greater than 90% of the loan face value and increasing further as base interest rates drop. Comparatively, the breakage cost on PWLB loans is just 30% of the loan face value. Debt Resistance UK spokespeople are available for comment.  For press inquiries  Email: lada@debtresistance.uk  Phone: 07429637423   Links to further information: UK Local Authority Debt Audit website: http://lada.debtresistance.uk/ Debt Resistance UK website: http://debtresistance.uk/ Interactive map of local authority debt: bit.ly/LADAmap What is a LOBO loan? http://bit.ly/LOBOLoan LOBO Loans are potentially illegal http://bit.ly/DebtTrap Conflicts of interest http://bit.ly/LADA3   As covered in the Media Financial Times: Local Councils suffer after taking out exotic loans Evening Standard: Council faces probe into “time-bomb” Lobo loans from City amid cuts in children’s services Independent: Sent loco by Lobos? The great council loan controversy RBS and Barclays made more than £300m selling questionable loans to UK councils MPs call on City regulators and Parliament to look at ‘lobo’ loans

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