National and Devolved Politics

08.02.19

Newham LBC to sue RBS over £150m in LOBO loans

Newham London Borough Council is to sue the Royal Bank of Scotland over the terms of around £150m worth of LOBO bank-loans, making it the latest council to take legal action against banks over the highly controversial loans.

Previously labelled the ‘debt capital’ of the UK by campaign group Debt Resistance UK, the authority has filed a high court claim against RBS around the terms and interest of the complex bank loans.

The lender-option, borrower-option (LOBO) loans were popular amongst councils in the 2000s due to appealing teaser interest rates, but the loans give the lender the option to increase the rates at fixed points in the loan term.

With LOBO loans there are set days when the interest rate can be changed by the lender. The borrower can choose to accept the rate or repay the loan in full, but there are no breakage penalties at this point. The breakage penalties only apply if the borrower wants to repay at another point in time or when the rate is not changed – the same as a fixed rate loan would be.

The east London authority took out around £578m in LOBO loans between 2003-10, with around £150m of those loans provided by RBS.

Holding the highest number of LOBO loans of any UK council, Newham reportedly spent £87m in 2017 on interest payments, and pays the highest interest rates in the UK which the group attributes to under-investment in social housing, a history of chronic gambling, low wages and the closure of its docklands.

The legal action follows the news earlier this week that seven other councils were suing Barclays over LOBO loans worth over a total £500m – which the authorities claim were fraudulently set with high rates before the financial crash.

Last year, Newham’s legal team filed a separate claim against Barclays over its LOBO loans, along with 14 other authorities, and proceedings are reportedly ongoing.

A spokesperson from Newham Borough Council confirmed that the authority had issued the claim, but could not comment further as it is a live legal matter.

LOBO loans have been heavily criticised, most notably by the shadow chancellor John McDonnell who called for a government investigation in order to “restore any historic loss to the public purse.”

Analysis from Research for Action showed that 240 authorities in total had been involved with LOBO loans, and a total of £16bn could be lost over the lifetime of the loans if the councils do not refinance them.

Image credit - trenchcoates

Comments

There are no comments. Why not be the first?

Add your comment

 

public sector executive tv

more videos >

latest public sector news

Sponsored roundabouts policy earns Bradford Council £128k a year

14/08/2019Sponsored roundabouts policy earns Bradford Council £128k a year

Bradford Council’s policy of allowing businesses to pay for sponsorships of roundabouts and grass verges has seen the local authority bring... more >
Council-owned solar farm generates £1.2m for frontline services

14/08/2019Council-owned solar farm generates £1.2m for frontline services

West Suffolk Council, through its local authority-owned solar farm, has raised more than £1.2m in funds to support frontline services in th... more >
TechnologyOne: Setting the foundation for shared service success

14/08/2019TechnologyOne: Setting the foundation for shared service success

Anwen Robinson, UK Operating Officer at TechnologyOne - an enterprise SaaS company - explains why adopting an enterprise vision is key ... 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

The importance of openness after Grenfell

The importance of openness after Grenfell

Following the recent Grenfell Tower tragedy, Lord Porter, chairman of the LGA, argues that if the public are going to have faith in the safety testing process then everything must be out in the o... more > more last word articles >
Growing in confidence: Meeting the targets of Apprenticeship Levy

15/08/2019Growing in confidence: Meeting the targets of Apprenticeship Levy

Debbie Rayfield, corporate apprenticeship manager at Sefton Council, discusses her role within the council’s Apprenticeship Team and the challenges that can be faced meeting the targets of ... more >
Sponsored roundabouts policy earns Bradford Council £128k a year

14/08/2019Sponsored roundabouts policy earns Bradford Council £128k a year

Bradford Council’s policy of allowing businesses to pay for sponsorships of roundabouts and grass verges has seen the local authority bring in £128,000 a year. With business adve... more >

the raven's daily blog

New rules to change the future of Social Value

05/06/2019New rules to change the future of Social Value

The government has announced the introduction of new rules to change the future of social value and make the way housing developers stump up the money for infrastructure both simpler and more transparent. These regulatory changes are designed to help achieve its ambition to deliver 300,000 extra homes per year by the mid-2020s.  ... 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