26th September 2016
This evening, Wirral Council’s Audit and Risk Committee will meet at 6 pm.
The main thrust of the meeting will be the desire to sign off last year’s accounts. However, this time around, a couple of flies have landed in the ointment. One is the recent ‘inadequate’ OFSTED finding against Wirral Children’s Services – which came about despite the fact that the CEO and most council directors had known of this failure for a long time.
The other is in the shape of a qualifying objection lodged with the council and their auditors – Grant Thornton – by an anonymous, meddling Wirral elector on 10th August this year.
The objection is centred around LOBO loans – Lender Option Borrower Option – and the aim of the move is three-fold:
- the authoring of a Public Interest Report
- a declaration that these loans are unlawful
- an auditor-backed referral of those involved to the courts
From the information we’ve been able to gather, Wirral Council entered into 19 of these loans and they were all dated between March 2001 and August 2007. The largest loan will be paid off happily in 2078, when we reach the grand old age of 119.
The total amount borrowed is £127.5 million, however should the council wish to pay them off, that may prove difficult – by their own estimates on a declared £101 million it would cost £259 million. Such a figure could be enough to bankrupt this local authority.
These have been described as ‘exotic’ and very difficult to understand. Derivatives, linked to gambling on future interest rate movements are involved with some of them. City banker turned whistleblower, Rob Carver was once involved in arranging them but had an attack of conscience and decided to go public on their dangers.
By their very nature, and regardless of interest rate movements, they are drawn up to favour the lender, but because interest rates have plummeted and stayed extremely low, councils have found themselves locked into enormous, ever-burgeoning debts that span many decades and are practically impossible to escape from.
Should local authorities wish to back out, they would have to pay enormous breakage fees which typically amount to up to 90% of the original sum loaned. It remains in the gift of the lenders to vary the interest rates to help, but these are city bankers, toiling in the interests of foreign banks, and as such, have no desire whatsoever to ease their clients out of a tight spot – regardless of the fact that it’s the vulnerable users of UK council services who will be impacted the most.
We as council taxpayers should never forget – it’s not the senior officers who originally set these loans up – nor their successors who inherited them – who will be personally impacted and in the firing line.
11.5 % of our council tax on Wirral is used every year to service these debts – which amounts to a huge amount of money – many millions – being simply frittered away. Instead of directing that cash towards easing the pressure on threatened services, we are bailing out Ian Coleman, former Finance Director for his poor decisions, and his successor, Acting Section 151 officer Tom Sault.
These two are either:
a. retired and untouchable, with their pay off and gold-plated pension, or;
b. currently on a stonking salary and unaffected by the social consequences
What councils were doing investing in these things during a period when there was a relatively rosy economic outlook for both public and private sectors, nobody really knows. Was it recklessness or an attack of over-confidence? Whatever the answer is, it’s highly unlikely that today’s local authority finance directors would touch them with a bargepole – not in a climate of government-imposed austerity and extremely difficult and straitened economic circumstances.
Becky Hellard – Liverpool
Talking of local authority finance directors, it came to our attention a couple of days ago that Liverpool City Council had held a similar finance meeting to the one held at Wirral Town Hall. Amongst many others, in attendance were Robin Baker of Grant Thornton auditors and Becky Hellard, Liverpool’s incumbent Section 151 officer – Joe Anderson’s Director of Finance.
The following video is reproduced courtesy of ever-vigilant Wirral blogger and journalist John Brace, who went along to record the proceedings. A highly unusual statement was made at this meeting in the presence of Grant Thornton’s Robin Baker. Before this occurred, it’s very interesting to watch the behaviour of chair and former Mayor, Councillor Frank Prendergast – the man with the chunky, glinting golden bracelet on each wrist. He was quick to interrupt just before Robin Baker speaks to caution him that John Brace was filming.
Here are the time stamps for each event:
- [02:02] Councillor Prendergast cautions Robin Baker re: filming
- [12:40] Finance Director Becky Hellard delivers her gaffe
Here’s the rough wording of the Becky Hellard howler:
“And then on the LOBO one, the bit I’d add in is … we remain confident that the agreements that were … in the previous financial years … did represent good value for money. They were at lower rates than the PWLB loan board offered at that time and we have got the ability to leave them at any stage without any penalties. So whilst this is all going on, I want to reassure members that we are actually not concerned about them as professionals.”
The reason these loans were at ‘lower rates’ than the Public Works Loan Board (i.e. the cheaper State option) were because they opened at a “teaser rate” for the first few years before the true, higher interest rate was applied for the remainder or bulk of the term.
As for this “…we have got the ability to leave them at any stage without any penalties,” it’s absolute rubbish. Becky Hellard appears to have been caught out misleading members of the committee – for whatever reason privately known to her. It’s also noticeable that Robin Baker sat mute and did not intervene to put her straight.
A much better analysis of this situation, written by LOBO loans campaigner Joel Benjamin, appears here on the blog of LOBO loans campaign group Debt Resistance UK.
We don’t really hold out much hope that a so-called Public Interest Report will be drafted by Grant Thornton, nor that an official auditor-backed approach will be made to the courts. Why? Because given Grant Thornton’s ongoing failure to stand up and be counted and condemn Wirral Council’s long-running failure and cover up over the BIG fund / ISUS / Working Neighbourhood’s issues – where in one instance £2 million was reputedly defrauded by a council partner – such outcomes are not looking promising.
News reaches us also that not long ago, Robin Baker of Grant Thornton was instrumental in planting obstacles aimed at preventing the exposure of Mayor Joe Anderson’s outrageous use of £89,000 of Liverpool council tax payers’ public money on a failed personal and private court case.
So no, we’re not being optimistic at all really. Not one bit.