With all this Labour Party conference talk of Private Finance Initiative ( PFI) schemes we thought we’d turn our attention to the Local Authority (LA) equivalent of the never-never and and return to an old story concerned with LOBO loans.
For those unfamiliar with the concept -although you might not know you’re paying through the nose for one – a LOBO stands for Lender Option Borrower Option.
The Lender Option means that periodically the lender can impose a new interest rate.
The Borrower Option is to agree to new interest rate or pay loan back in full.
However if the local authority chooses to pay the loan back in full there are punitive ‘break penalties’ which can cost the local authority (and more specifically the council taxpayer) an arm and a leg.
Last night’s Audit & Risk Management Committee confirmed that Wirral Council have taken out a LOBO loan and the reason that the annual accounts have not been fully signed off by external auditor Grant Thornton is that a member of the public has raised an objection to the LOBO loan situation.
Indeed we understand from the excellent Debt Resistance UK website that Wirral Council is one of 46 councils that are subject to such a legal objection (see below). Full details can be read here : LOBO legal objections
LOBO Debt & “Fair (repayment) Value” for financial liabilities at 46 UK Councils where objections were lodged in 2015/16 and 2016/17 financial years.
As you can see Wirral have taken out an eyewatering LOBO loan of £157+ million and it is estimated that they will be paying back £295 + million . The loan repayments represent 10.2% of council tax income and debt per person on Wirral is £924 .
Furthermore latest figures Department of Communities and Local Government (DCLG) indicate that Wirral is the 13th (unlucky for us) overall highest LA borrower in the UK. No doubt part of that that is to cover pay-offs to council managers, contracts for consultants and salaries for ‘transformers !