Audit, Inspection and Safety

08.05.19

Newham Council to save £143m after terminating risky LOBO loans with NatWest

Newham Council has reached a deal with NatWest to terminate a number of controversial LOBO bank-loans which will see the authority save up to £143m.

The termination agreement will allow the council to pay off the lender-option, borrower-option (LOBO) loans at a considerably lower rate of interest in order to save the equivalent of £3.5m per year over the loans’ remaining 41 years.

Previously labelled the ‘debt capital’ of the UK, Newham Council took out around £578m in LOBO loans between 2003 and 2010, but the loans, which at the time were popular amongst local authorities, give the lender the option to increase the interest rates at points in the loan term.

In February, the east London authority filed a High Court claim against RBS over the terms and interest of £150m worth of the bank-loans, which followed legal action from seven other councils taken against Barclays over £500m of LOBO loans.

Analysis from Research for Action showed that 240 councils have been involved in LOBO loans, and that councils are set to lose £16bn over the lifetime of the loans if they aren’t refinanced.

Now, following lengthy negotiations with NatWest, Newham has entered into agreement with the government’s Public Works Loan Board (PWLB) to pay off the loans at lower rates of interest.

The council took out six LOBO loans with the bank, each worth £25m, in 2009, and Newham said terminating them will “remove significant risk” and improve the council’s financial standing at a time of austerity.

Newham’s mayor, Rokhsana Fiaz, said: “I made a promise to Newham residents in my election manifesto last year that I would clean up the council’s budget. A key element of that was to address the scourge of risky LOBO loans taken out under the previous administration.

“After just a year in office I have made an important step towards achieving this and it will save us significant amounts of money every year.

“Over the past 10 years that the loans have been in place, it’s cost us an extra £31m in interest payments compared to borrowing from the PWLB. That’s money that should have been spent on Newham residents.”

She added that the deal “we’ve successfully nailed down today” is a successful resolution of this litigation and will save up to £143m for Newham residents.

Comments

There are no comments. Why not be the first?

Add your comment

 

public sector executive tv

more videos >

latest public sector news

Multi-million pound projects in Grimsby given green light

29/05/2020Multi-million pound projects in Grimsby given green light

North East Lincolnshire Councillors approved plans yesterday (May 28) that will see a total of £4.967m invested into two major highway proj... more >
East Midlands £2.6bn transport plan to boost HS2 links at Toton

29/05/2020East Midlands £2.6bn transport plan to boost HS2 links at Toton

The East Midlands region has been promised a huge economic boost with a £2.7bn multimodal transport plan published this week (May 28). ... more >
Kirklees Council agrees £3.4m investment into schools

29/05/2020Kirklees Council agrees £3.4m investment into schools

Schools in Kirklees are set to benefit from a £3.4m investment, agreed by the cabinet members yesterday (May 28). The funding will rep... more >

editor's comment

25/10/2017Take a moment to celebrate

Devolution, restructuring and widespread service reform: from a journalist’s perspective, it’s never been a more exciting time to report on the public sector. That’s why I could not be more thrilled to be taking over the reins at PSE at this key juncture. There could not be a feature that more perfectly encapsulates this... read more >

last word

Prevention: Investing for the future

Prevention: Investing for the future

Rob Whiteman, CEO at the Chartered Institute of Public Finance (CIPFA), discusses the benefits of long-term preventative investment. Rising demand, reducing resource – this has been th... more > more last word articles >
Multi-million pound projects in Grimsby given green light

29/05/2020Multi-million pound projects in Grimsby given green light

North East Lincolnshire Councillors approved plans yesterday (May 28) that will see a total of £4.967m invested into two major highway projects. Part of the plan will release £2.... more >
East Midlands £2.6bn transport plan to boost HS2 links at Toton

29/05/2020East Midlands £2.6bn transport plan to boost HS2 links at Toton

The East Midlands region has been promised a huge economic boost with a £2.7bn multimodal transport plan published this week (May 28). The plan has been developed and published by a nu... more >

the raven's daily blog

What came first, the bad customer or the bad customer service?

17/03/2020What came first, the bad customer or the bad customer service?

Source: PSE Feb/March 20 Stephen Bahooshy, Senior Commissioning Manager and Nicky Selwyn, Carer and Service User Group Chair, Croydon Council.   Here it is, that age old question: What came first, the bad customer or the bad customer service? (Or maybe we just made that up, whatever). But it’s true though, right? We w... more >
read more blog posts from 'the raven' >

comment

Peter Kyle MP: It’s time to say thank you this Public Service Day

21/06/2019Peter Kyle MP: It’s time to say thank you this Public Service Day

Taking time to say thank you is one of the hidden pillars of a society. Being on the receiving end of some “thanks” can make communit... more >
How community-led initiatives can help save the housing shortage

19/06/2019How community-led initiatives can help save the housing shortage

Tom Chance, director at the National Community Land Trust Network, argues that community-led initiatives are a productive way of helping to solve... more >
Aberdeen's green transport fleet attracting international attention

19/06/2019Aberdeen's green transport fleet attracting international attention

Aberdeen City Council’s hydrogen spokesperson, councillor Philip Bell, highlights the Granite City’s determination to play a leading ... more >
A fifth of public sector workers have never received a thank you from the people they serve

13/06/2019A fifth of public sector workers have never received a thank you from the people they serve

A fifth of the country’s public sector workers say they have NEVER received a ‘thank you’ for doing their job as Public Service... more >

interviews

Artificial intelligence: the devil is in the data

17/12/2018Artificial intelligence: the devil is in the data

It’s no secret that the public sector and its service providers need to invest in technology to help make better use of their resources. Bu... more >
Digital innovation in the public sector: The future is now

17/12/2018Digital innovation in the public sector: The future is now

One of the public sector’s key technology partners has recently welcomed a new member to its team. Matt Spencer, O2’s head of public ... more >
New Dorset Councils CEO on the creation of a new unitary: ‘This is going to be the right decision for Dorset’

05/11/2018New Dorset Councils CEO on the creation of a new unitary: ‘This is going to be the right decision for Dorset’

The new chief executive of one of the new unitary authorities in Dorset has outlined his approach to culture and work with employees, arguing tha... more >
Keeping the momentum of the Northern Powerhouse

15/10/2018Keeping the momentum of the Northern Powerhouse

On 6 September, the biggest decision-makers of the north joined forces to celebrate and debate how to drive innovation and improvement through th... more >

public sector focus

View all News