- Debt Resistance UK calls for Citizens’ Debt Audits into Local Authorities across the UK
- Group has sent hundreds of FOI requests, mapping the extent of the LOBO loan scandal that will be presented on “How councils blow your millions” – Channel 4 Dispatches 8pm on Monday 06 June
- £15bn of unregulated LOBO lending to Councils and up to £70bn to housing associations, highlights deregulated finance has captured our public institutions and become too powerful, campaigners say.
Inspired by decades of movements against unjust debts across the world, Debt Resistance UK (DRUK) is calling for Local Authority Debt Audits in the UK.
The group’s work follows in the steps of self-organised municipal debt audits undertaken by the Citizen Debt Audit Platform (PACD) in Spain, initiated by the people and connected to grassroots movements that are fighting austerity on multiple fronts. Debt Audits are a powerful tool in the process of reclaiming democratic governance of institutions as recently seen with the Debt Truth Committee in Greece, and in Ecuador in 2008.
On Monday 06 July, Channel 4 Dispatches will present the results of 12 months of Debt Resistance UK research – involving 300+ FOIA requests, sent to approximately 250 UK municipal governments, to quantify the full extent and additional costs of private bank debt being imposed on UK taxpayers. Billions of pounds of risky bank lending to local authorities involving complex derivatives, that has gone on unregulated and unaudited by authorities, and unreported by the UK media.
Vica Rogers, from Debt Resistance UK says:
“We are initiating Local Authority debt audits to demonstrate how Local Government finance has been co-opted to work in the interests of the financial sector, and not in the interests of the people. To be clear, this is not an attack on Local Government, but an attempt to reclaim our democratic institutions and the common resources they manage from the predatory clutches of financial institutions.”
To do so, we must understand how our public bodies and the financial system function and how they interact. Debt audits have proven a powerful tool for this across the world. We are following the steps of the self-organised municipal debt audits undertaken in Spain thanks to the Citizen Debt Audit Platform. ”
DRUK has been investigating a type of loan that Local Authorities have taken out with private banks including Barclays and RBS upon the advice of CAPITA and ICAP called Lender Option Borrower Option (LOBO) loans. Interest rates on LOBO loans can cost as much as double what Councils pay if they borrowed directly from central government via the Treasury Public Works Loan Board.
LOBO loans contain embedded derivatives, even though the use of swaps (a type of derivative) is banned for use by local authorities following the 1989 Hammersmith and Fulham case. Bankers, brokers and financial advisors including ICAP and CAPITA are gaining huge profits on LOBO loan deals at the expense of public services.
At the London Borough of Newham, borrowing via LOBO loans is costing ratepayers a staggering £13 million in additional annual interest payments to banks, at a time when the council is passing emergency austerity budgets, and violently evicting the Focus E15 Mums and other social housing tenants to skimp and save thousands.
At Kent County Council, the difference between what Kent say their LOBO loans cost and the actual repayment cost is more than the councils annual social welfare budget.
No-one is watching these practices as Local Authority finance is unregulated and is not independently audited following the closure of the Audit Commission in April 2015.
The top Local Government LOBO loan borrowers with bank debt above £50 million are:
Commenting for Debt Resistance UK – Jamie Griffiths said:
“LOBO loans are a symptom of a financial system that no longer serves the interests of society. Debt is not apolitical. DRUK calls on citizens to take local action and initiate the process of reclaiming our democratic institutions. We need Local Government finance based on transparency and democratic participation, not obscure financial products pimped by vested City interests.”
Debt Resistance UK is a group of activists, campaigners and researchers that exposes and builds resistance to exploitative lending practices, whether related to public or private debt to challenge the legitimacy of the current debt based economy in pursuit of a truly democratic economic system.
Debt Resistance UK are calling a public meeting Thursday 16 July to discuss the LOBO loan scandal and the next steps for a local authority debt audit campaign.
