• Home
  • About
  • Subscribe
  • LATIF
  • Conferences
  • Dashboard
  • Edit My Profile
  • Log In
  • Logout
  • Register
  • Edit this post

Room 151

  • 151 BRIEF

    What's New?

  • John Turnbull elected president of the SLT

    May 12, 2022

  • Pension pool identifies biodiversity as a priority

    May 11, 2022

  • TfL latest to face credit-rating downgrade by Moody’s

    May 10, 2022

  • Government proposes ‘fairer, more accurate’ business rates system

    May 10, 2022

  • Queen’s Speech confirms planning reforms

    May 10, 2022

  • 18,000 affordable houses lost through ‘permitted development’

    May 9, 2022

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews
  • Briefs

Councils prepare to resist complaints their LOBO loans are ‘irrational’

0
  • by Colin Marrs
  • in Treasury
  • — 25 Aug, 2016

A group of 24 local authorities is set to fight complaints to their auditors that their Lender Option Borrower Option Loans are unlawful.

Campaign group Debt Resistance UK (DRUK) has coordinated complaints by residents of the authorities, who have mounted objections under the 2014 Local Audit and Accountability Act.

Auditors for the authorities, which have a combined total of £4.9bn of LOBO loans, will now decide whether to investigate the claim that the loans were “irrational”.

DRUK researcher Joel Benjamin said: “Our 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.”

“A significant proportion of the £15bn 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.”

Under the 2014 act, a local government elector can ask the external auditor to apply to the High Court for a declaration that an item within its council’s accounts is unlawful.

Irrational spending is defined as that which is so wholly unreasonable that no reasonable person could have made that decision.

When deciding whether to apply for a judge’s declaration, the external auditor weighs the possible public interest benefits of going to court against the likely costs.

Bhupinder Chana, principle finance manager at Leeds City Council, said that the council was likely to reject the claim that its £445m of LOBO loans were taken out irrationally.

He said: “At the time we took these loans, the comparator was the Public Works Loan Board and the LOBOs provided a lower borrowing cost. There is a cost to breaking out of the loans, but that is the same for the PWLB.

“While it is a sizeable book, auditors have been through our accounts in previous years and allowed LOBOs as a proper way to raise finance.”

He said that the council is also checking to establish whether the Leeds objector was on the electoral role at the relevant time necessary to make a valid objection.

A statement from one of the auditors, KPMG, said: “We can confirm that we have received a number of objections in relation to local authority accounts.

“As part of our role as auditors and, in accordance with National Audit Office guidance, we are in the process of considering these objections.

“We will then respond directly to the objector and the local authorities.”

An Audit Scotland spokesman said: “We do not have powers to overturn previous decisions made by councils. But we do carry out annual audits for every council where we look at the adequacy of arrangements to ensure that their overall financial position is sound.

“This includes examining financial performance, compliance with financial requirements and targets, and future financial plans. Were the correspondence to result in further examination by the auditors, and any significant audit findings arose, these would be reported in annual audit reports, which are made public.”

The councils affected by the LOBO objections are: Brent, Brighton & Hove UA, Bristol, Camden, City of Edinburgh, City of Glasgow, Cornwall UA, Greenwich, Haringey, Hounslow, Kent, Kingston upon Hull, Lancashire, Leeds, Lewisham, Liverpool, Manchester, Medway Towns UA, Newcastle upon Tyne, Newham, Oxfordshire, Portsmouth UA, Tower Hamlets and Wirral.

A local objector who was quoted in a DRUK press release said: “The use of Lender Option Borrower Option instruments without appropriate justification compromises the work of section 151 officers.

“They should exercise more prudence to the risks that they are exposing local authorities to.”

Get the Room151 Newsletter

 

Share

You may also like...

  • CCLA/Room151 Impact Awards: Deadline extended 29th Apr, 2021
  • Bank of England battles inflation with latest interest rate rise 21st Mar, 2022
  • Auditors call for more investment in finance function skills 25th Feb, 2022
  • Step-out strategies: Hitting the sweet spot between liquidity and short duration 25th Feb, 2021

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 8 hours ago

    Bags of capacity – now to housing delivery: HRAs have been freed up and councils are starting to invest, but some remain cautious, writes Steve Partridge. He suggests that a minimum of £10bn of additional borrowing could be[...] dlvr.it/SQDvxk pic.twitter.com/yZmoWzHv6U

    Room151 9 hours ago

    Bags of capacity – now to housing delivery room151.co.uk/treasury/bags-…

    Room151 1 day ago

    To Michael Gove: a modest proposal: Conrad Hall has written an open letter to the levelling up secretary suggesting an unusual (and tongue-in-cheek) proposal to help councils predict next year’s government grant. Dear Secretary of State,[...] dlvr.it/SQ9GpX pic.twitter.com/mSX1xgeL8a

    Room151 1 day ago

    Queen’s Speech: an ambitious plan hampered by omissions: Richard Harbord examines the impact of the government’s legislative proposals on councils, and concludes that local authorities expect and need more from central government. However you view the… dlvr.it/SQ8hmP pic.twitter.com/BsnziyNPIO

    Room151 2 days ago

    Insights and inspiration from LGPS leaders past and present: Four current and former LGPS leaders have recently given powerful and insightful interviews as part of the Fiftyfaces podcast, which showcases inspiring investors and their stories. Hosted by… dlvr.it/SQ53lC pic.twitter.com/IRYMFPxdA2

    Room151 3 days ago

    Rate rise represents ‘fastest increase in borrowing costs in 25 years’: Partner Content: CCLA Investment Management’s Robert Evans analyses the rationale for the Bank of England’s latest rise in the Official Bank Rate and assesses the likely outcome of… dlvr.it/SQ33k3 pic.twitter.com/A81yiS1UgN

    Room151 3 days ago

    The Liability Benchmark, very much unloved at the recent Room151 treasury briefing, receives a much more positive assessment from Jackie Shute. There’s ‘no better tool for treasury portfolio management’, she says. #localgov #finance room151.co.uk/treasury/in-pr…

    Room151 3 days ago

    In praise of the Liability Benchmark: Jackie Shute responds to recent criticisms of the framework used to plan the future borrowing requirements of a local authority. I’m not suggesting that this debate will have the same[...] dlvr.it/SQ2cGf pic.twitter.com/4rqXTpHC9A

    Room151 3 days ago

    Room151 launches survey on IFRS 9 override and MRP impact: Room151 has launched a survey to gauge the sentiment in local government on two important issues: the IFRS 9 statutory override and the consultation on Minimum Revenue Provision (MRP). The[...] dlvr.it/SQ1VT7 pic.twitter.com/ahPEiLoFNC

  • Categories

    • 151 News
    • Agent 151
    • Audit
    • Blogs
    • Business rates
    • Chris Buss
    • Cllr John Clancy
    • Council tax
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Education
    • Forum
    • Funding
    • Governance
    • Graham Liddell
    • Housing
    • Ian O'Donnell
    • Infrastructure
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • Levelling up
    • LGPS
    • Mark Finnegan
    • Net Zero
    • Private markets
    • Recent Posts
    • Regulation
    • Resources
    • Responsible investing
    • Richard Harbord
    • Risk management
    • Social care
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Transport
    • Treasury
    • Uncategorized
    • William Bourne
  • Archives

    • 2022
    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Berkshire aims to ring-fence pension assets for local investment
  • Next story News round-up: Scottish councils’ negotiating rights, council expenditure & borrowing, pension mandates and Welsh budgeting

© Copyright 2022 Room 151. Typegrid Theme by WPBandit.

0 shares