The investigation

LOBO loans were first uncovered in 2014 by an investigation by Debt Resistance UK and MoveYourMoney. The investigation was then continued from 2017 by the worker co-operative Research for Action, set up by some of its members.

The investigation relied on the use of Freedom of Information (FOI) requests, which were sent to all the councils that appeared as having bank debt, according to data collected by the Ministry for Housing, Communities and Local Government (MHCLG).

Many councils refused to provide the information requested until the Information Commissioner’s Office (ICO) ruled that the public interest in disclosing how taxpayer money had been spent overruled the commercial confidentiality councils had relied on to withhold the loan details.

The investigation also used the FOI Act to request information from other public bodies such as:

  • The Financial Conduct Authority (FCA)
  • The Ministry for Housing, Communities and Local Government (MHCLG)
  • Her Majesty’s Treasury (HMT)
  • The Competition and Markets Authority (previously Competition Commission)
  • The Local Government Association (LGA)
  • The Audit Commission (closed in April 2015)
  • The National Audit Office (NAO)

Most FOI requests were sent through the website so enquiries and responses would be freely available to the public and journalists.

The first data was published by Debt Resistance UK on the website The current website was developed by Research for Action and provides an updated version of the data.

Inspecting and objecting to the accounts

Between 2015 and 2020, Research for Action and Debt Resistance UK supported over 50 local residents in using the 2014 Audit and Accountability Act to inspect their council accounts and object to LOBO loans.

The Act provides rights to residents to inquire about their councils’ financial accounts: residents are entitled to ask questions to the external auditor on items in the accounts of the last financial year and to ask to inspect all books, deeds, contracts, bills, vouchers and receipts relating to them. The right to inspect the accounts extends to journalists and bloggers.

The Act also provides the right to object to a council’s accounts which consists of raising an issue related to an item of the financial accounts and asking the external auditor to either produce a public interest report on the issue and/or request a declaration from the high court that the item is unlawful. An objection can only be submitted by a local resident, who must specify why they believe the item in the accounts they are referring to is unlawful.  This is defined as something the council:

  • spent or received without powers to do so
  • took from or added to the wrong fund or account
  • spent on something that they had the power to spend on, but the decision to spend the money was wholly unreasonably or irrational – as in, no reasonable person would have made the decision.

For more information on how these rights can be exercised, Research for Action has published a guide called “Reclaim local democracy: how to challenge your council’s financial decisions”.

The auditors did not take public action as a result of the objections. Instead, they brought the issue to the attention of central government in private meetings, which were only uncovered by FOI requests. The objections however did force councils to discuss LOBO loans publicly in their meetings and provided the investigation with additional information on the loans.

The rights to inspect and object could be powerful tools for residents to hold their council to account. However, Research for Action encountered many shortcomings in how the rights are upheld, which are described in the report “Democracy denied: audit and accountability failure in local government”.

Calling on central government

in January 2016, members of Debt Resistance UK obtained a private meeting at the National Audit Office (NAO). They presented evidence on the issues related to LOBO loans covered by this report, but there was no follow up by the NAO.

In 2016 an open letter was co-signed by more than 90 councillors, MPs, citizens and civil society organisations in support of calls by Clive Betts MP and John Mann MP for a Treasury Select Committee and Financial Conduct Authority (FCA) inquiry into LOBO loans. The Treasury Select Committee and the FCA did not provide any response to the request.

Members of Research for Action have brought up the issue on multiple occasions with the Public Accounts Committee, the NAO,  the Ministry for Housing, Communities and Local Government and the Chartered Institute for Public Finance and Accountancy (CIPFA).

Alongside the continuous campaign demanding an intervention by central government, Debt Resistance UK and Research for Action also submitted evidence to the following committees and inquiries relating LOBO loans to failures in accountability in local government:

Local action

Newham, an east London borough, was the largest LOBO loan borrower and had some of the worst types of loans. Newham is also one of the most impoverished local authorities in the country, where the housing crisis, declining wages and cuts to benefits and services have been causing widespread deprivation.

Research for Action decided to run a pilot project for a citizen debt audit in Newham, which resulted in the publication of a report in October 2018 titled “Debt and democracy in Newham: a citizen audit of LOBO debt”. The document illustrates why the council’s LOBO debt was illegitimate, and called for action by the council, government and related bodies.

As part of the citizen debt audit Research for Action:

  • supported residents and councillors in inspecting and objecting to their council’s accounts in relation to LOBO loans, obtaining crucial information and documents previously refused via FOI requests.
  • interviewed randomly selected residents in the vicinity of council services to broaden the understanding about the effects of the council’s financial decisions on residents.
  • interviewed and held workshops with campaigning organisations, community groups and charities in Newham, asking for their views on the impacts of cuts in services and how the council was meeting residents’ needs. The evidence gathering was combined with sharing information about LOBO loans and the council’s financial situation, adding strength to arguments groups and residents could use in their campaigns.

While the Newham citizen debt audit was underway, the political situation in the borough changed drastically. In 2018 one of the councillors who had been active on the LOBO loan issue, Rokhsana Fiaz, was elected as the Mayor of Newham. Since, the council initiated legal action against Barclays and RBS, and has taken steps to improve accountability and democracy locally.

A similar approach was taken to support action in other local authorities, though with less depth and support due to the limited capacity of the organisation.

Shareholder activism

Shareholder activism was used to bring LOBO loans to the attention of banks, brokers and advisors aswell as the shareholders of these companies.

Members of Debt Resistance UK and Research for Action participated themselves and supported residents and councillors in attending the annual general meetings (AGMs) of some of the financial institutions involved in the scandal, including RBS, HSBC, Barclays, ICAP and Capita.

Thanks to their participation in AGMs, a Newham Councillor managed to obtain important statements from the banks. At Barclays 2016 AGM, they were invited for a follow up meeting with Barclays to discuss the council’s LOBO loans. At a 2018 RBS AGM they were informed by the bank that they had been in secret negotiations with the council to restructure Newham’s LOBO loans.

Media coverage

Media coverage was key in bringing LOBOs into the public eye.

The first articles on LOBOs appeared in 2014 in the following blog posts:

Following campaign work by Debt Resistance UK, the issue was picked up by Channel 4 in 2015 who under the guidance of Nick Dunbar produced a Dispatches documentary titled “How councils blow your millions”. The documentary exposed the issue and communicated it in an accessible format to the general public, while providing expert views through interviews with:

  • Abhishek Sachdev, Chief Executive Officer at Vedanta Hedging Ltd
  • Rob Carver, former derivatives trader at Barclays Capital
  • Mark Pickering, Director of Arlingclose
  • Clive Betts MP, chair of the CLG Committee and Vice President of the LGA
  • Fiona Ferguson, Councillor at Cornwall Council

As a consequence of the documentary, the 2015 CLG Committee Parliamentary inquiry on “Local council bank loans” was called.

However, it effectively took until 2016 for the rest of the mainstream media to take up the issue. Local and specialist media has been crucial in keeping the issue in the public eye, confirming the importance of media plurality for democracy.