AN EAST Londoner has served his council yesterday with a notice legally objecting to the authority’s “irrational” bank borrowing.
Angus McNelly requested a High Court declaration that the London Borough of Tower Hamlets went against constituents’ interests by taking £77.5 million in lender option, borrower option (Lobo) loans.
The loans were made by Barclays and RBS between August 2007 and September 2009 and under the Lobo lending agreement, interest rates can be raised by the bank at any point.
Mr McNelly said the use of Lobo loans highlighted some of the biggest problems of Britain’s financial system.
“We have one of the country’s poorest boroughs implementing spending cuts of £30 million and council tax hikes,” he said.
“At the same time they are being forced to pay over the odds for debt repayment that is linked through financial instruments to the vicissitudes of the market.
“Not only is a taxpayer-funded council being shafted by a bank bailed out by the tax payer (RBS), but both the lenders … were recently fined for rigging the Libor rate on which these loans are benchmarked.
“I feel strongly that the good of the people of Tower Hamlets and the council’s financial security has to come before the profits of big banks.”
Mr McNelly is being supported in his claim by campaigning group Debt Resistance UK.
“Lobo loans (mis)sold to Tower Hamlets are symbolic as the borough — one of the poorest in the UK — hosts the Canary Wharf financial district in which Barclays is located,” said Debt Resistance spokesman Joel Benjamin in a statement.
“After bailing out RBS in 2008, it’s outrageous councils like Tower Hamlets are being forced to pay over the odds to borrow from these same banks in a time of harsh austerity cuts to council budgets.
“We’re calling for citizen-led challenges like that made by Angus McNelly in each of the 250 councils affected by Lobo loan mis-selling.”
Tower Hamlets council did not reply to a request for comment.