National and Devolved Politics

04.06.18

Two Dorset councils take out ‘fraudulent’ high-risk loans worth over £120m

Dorset councils have taken out controversial bank loans worth millions of pounds.

Campaign group Debt Resistance UK revealed that Dorset County Council and Weymouth and Portland Borough Council have taken out £123m of Lender Option Borrower Option loans (LOBOs) in an effort to reduce their debts.

Dorset County Council took out £95.9m, while Weymouth and Portland Borough Council took £17m over a decade ago to the end of the 15/16 financial year.

The LOBOs, which were uncovered on Channel 4’s Dispatches documentary series, allow private banks to propose or impose a new fixed rate on a pre-determined future start date.

The borrower can choose to accept the rate or repay the loan in full, but there are no breakage penalties at this point. 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.

Last month the Chartered Institute of Public Finance and Accountancy (CIPFA) urged local councils to review their LOBO loans after auditing firms expressed concern at their impact on local authorities’ accounts. Channel 4's Dispatches found that over 200 authorities had used the loans, totalling up to £15bn.

Cllr John Whitworth, chair of the Newham Council Scrutiny Committee, labelled the LOBO loans a “fraud on the people,” arguing that many local authorities took out the loans when they were struggling financially during the economic downturn in 2008. He added that the loans became “a very serious handicap” on councils dealing with austerity in later years.

Debt Resistance UK campaigner Joel Benjamin noted: “it is always cheaper for government to borrow than banks, and that PFI and by extension LOBO loans are therefore a fraud.”

 Cllr Jeff Cant, Leader of Weymouth & Portland Borough Council, said: “The council carefully considers the short and long term effects of all funding options before any decision is taken.

“We have a sound financial management strategy in place. This has enabled us to balance our budget and continue to invest in ambitious regeneration plans as we look at major projects to improve our borough.”

Last week the creation the of Christchurch and Poole Council and Dorset Council was approved. The deal is expected to deliver £108m in savings.

 Enjoying PSE? Subscribe here to receive our weekly news updates or click here to receive a copy of the magazine!

CORRECTION: Corrections were made to this article. A comment by Weymouth & Portland Borough Council has been inserted, loans taken from Weymouth & Portlant Borough Council has been adjusted from £27m to £17m. Clarity has been given to the repayment process of a LOBO loan. Savings predicted have been adjusted from £6m to £108m.

Comments

There are no comments. Why not be the first?

Add your comment

 

related

public sector executive tv

more videos >

latest public sector news

London council ‘negligent and in denial’ over tower blocks at risk of collapse

22/06/2018London council ‘negligent and in denial’ over tower blocks at risk of collapse

Two tower blocks in North London are at risk of collapse, with the area’s council announcing it wants to begin re-housing residents “... more >
Christchurch allowed into High Court over Dorset council merger battle

22/06/2018Christchurch allowed into High Court over Dorset council merger battle

An ongoing battle between Christchurch Borough Council and a planned council merger has been given the go-ahead to proceed to the High Court. ... more >
Government does not ‘currently have understanding’ of skills businesses need going through Brexit

22/06/2018Government does not ‘currently have understanding’ of skills businesses need going through Brexit

Government departments “do not have sufficient understanding” of what skills UK businesses need, or how Brexit will impact the supply... 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 >
Christchurch allowed into High Court over Dorset council merger battle

22/06/2018Christchurch allowed into High Court over Dorset council merger battle

An ongoing battle between Christchurch Borough Council and a planned council merger has been given the go-ahead to proceed to the High Court. Last month, Christchurch council outlined its pl... more >
Government under fire for lack of care funding after £20bn NHS pledge

18/06/2018Government under fire for lack of care funding after £20bn NHS pledge

Council chiefs have heavily criticised Theresa May for not including social care funding in her promise to increase cash resources by £20bn annually for the NHS to mark the service’s ... more >

the raven's daily blog

The work of the vanguards can help overcome the challenges of integrated care

29/05/2018The work of the vanguards can help overcome the challenges of integrated care

Following the announcement of the second wave of integrated care systems (ICSs), NHS Providers, the NHS Confederation, NHS Clinical Commissioners (NHSCC) and the LGA reflect on how lessons learnt by members from across the four organisations – that have designed and worked together as part of the vanguards – will support the j... more >
read more blog posts from 'the raven' >

comment

Grenfell, one year on

18/06/2018Grenfell, one year on

In the year since the Grenfell Tower disaster, the LGA has been working tirelessly to ramp up fire safety regulations and ban ‘desktop&rsqu... more >
Brexit's long shadow over devolution

18/06/2018Brexit's long shadow over devolution

The EU Referendum and the stop-start Brexit negotiations have left a looming shadow of uncertainty over devolution in the UK, writes Anthony Sala... more >
Decisions, decisions

18/06/2018Decisions, decisions

The true social value of procurement comes from asking challenging questions and thinking outside the box, argues Melissa Bell, sustainable procu... more >
Finding the balance

18/06/2018Finding the balance

Douglas White, head of advocacy at the Carnegie UK Trust, evaluates the risk-benefit relationship of data sharing within the public sector, highl... more >

interviews

Data at the heart of digital transformation

03/04/2018Data at the heart of digital transformation

SPONSORED INTERVIEW Grant Caley, UK & Ireland chief technologist at NetApp, speaks to PSE’s Luana Salles about the benefits of movin... more >
GDPR: The public sector scarecrow

03/04/2018GDPR: The public sector scarecrow

SPONSORED INTERVIEW PSE’s Josh Mines chats to Martin de Martini, CIO of Y Soft, about what the General Data Protection Regulation (GDPR)... more >
Keeping London safe

05/03/2018Keeping London safe

Theo Blackwell, London’s first-ever chief digital officer (CDO), speaks to PSE’s Luana Salles about the role he plays in ensuring the... more >
BIM: Digitising the public sector

19/02/2018BIM: Digitising the public sector

PSE’s Josh Mines talks to Stephen Crompton, CTO at GroupBC, and Stuart Bell, the company’s sales and marketing director, about how Bu... more >

public sector focus

  • 12/06/2018G-Cloud 10: small changes, big opportunities

    Rafael Cortes, Foehn head of marketing, explains how G-Cloud 10 should be a catalyst for innovative solutions and not a source of complacency. It was...
  • 04/06/2018Targets and tribulations

    David Willett, corporate director at The Open University, walks us through the university’s research into the apprenticeship levy, as well as...
  • 30/04/2018The legacy of Grenfell

    PSE’s Seamus McDonnell looks at the reactions of councils and the government to the Grenfell Tower fire, from the immediate aftermath to the...
View all News