- Created: Tuesday, 12 December 2017 11:35
- Written by Hannah Caller
Newham Council in east London – where the Focus E15 campaign is based – has been run by Labour for the last 50 years, since the borough was formed. It is now, according to Debt Resistance UK, the ‘debt capital’ of Britain.
Research published by Debt Resistance UK shows that in the last five years, total financial council reserves have risen 67% across the capital. Meanwhile, the number of people forced off housing benefit has risen by 20%, and there has been a rise of 250% of people being placed out of borough for housing and a 230% increase in street homelessness.
Robin Wales has been Labour leader of Newham Council since 1995 and Labour Mayor of Newham since 2002. In 1997 he made his priorities clear when he said: ‘There are too many people, those currently living in Newham and those attracted from other London boroughs, who survive on low incomes or who present themselves as homeless. Whilst we will offer support and carry out our legislative duties, our aim will be to increase Newham’s property values, and raise the income profile of all our residents’. More than a decade later, he had not changed his tune when he told the young mothers and pregnant women from Focus E15 hostel faced with being rehoused miles away in Birmingham, Manchester or Hastings’ ‘If you can’t afford to live in Newham, you can’t afford to live in Newham’.
It should come as no surprise then that by 2017 Newham – one of the fabled ‘Olympic legacy’ boroughs – now has 12,000 homeless people, one in every 25 residents. This is the highest number in England. Newham also has the dubious distinction of having the highest number of residents in temporary accommodation in London, and is among the councils moving the highest number of people out-of-borough and indeed out of London altogether. Meanwhile Newham has experienced some of the biggest property value rises in Britain – up to 400% since 2000.
Since 2010, total Newham spending on council services has been cut by 27% and spending on social housing has declined approximately 50%.’ Despite housing being in the top three priorities for Newham residents, the council is spending significantly less money on housing than debt repayments to banks for its dodgy loans, known as LOBOs – £20m on housing services compared to over £30m on banks in 2014/15.
Newham’s LOBO scandal
LOBO – or Lender Option Borrower Option – loans are short-term, variable rate loans a number of councils across Britain took out in place of safer fixed-rate 50-year loans from central government. The complexity of the contracts makes the overall interest rate of the loan difficult to gauge without, as Debt Resistance UK explains, sophisticated pricing tools beyond the reach of local authorities. It quotes a former Barclays Capital employee, Rob Carver, saying: ‘You just need a Bermudan swaption pricer to know the relevant volatility surface, some kind of interest rate model calibrated to the appropriate processes and the full forward and spot curve’ – adding ‘these are not the things the average Mr Perkins in a council finance department has to hand’. At least 230 councils across Britain have some form of LOBO loan.
Between 2001 and 2010, Newham took out £563m worth of loans from Barclays Bank and RBS. The teaser interest rates started low but continue to escalate and Newham is now paying 7.5% interest. Newham Council borrowing increased from £937m in 2010 to £1.67bn in 2017 (£5,416 for each person in the borough). Annual spending on interest repayments increased from £54m (2010) to £83m 2017 – now equivalent to 125% of council tax – the highest in England. Newham has the most bank LOBO loans of any council in Britain. The upshot of this scandalous financial mismanagement is that in 2015, Newham paid 70% of its council tax as debt servicing and in 2016/17, this has risen to 125% – the highest in England – meaning that more than all of what comes in as council tax payments, goes straight out to the banks. In 2016, the council called in bailiffs on 1,560 people for non-payment of council tax. The previous year, while the annual debt repayments amount to £51m, Newham Council circulated leaflets asking residents to help work out where £50m savings could come from. At the same time, Newham has increased its usable reserve from £77m in 2010 to £434m currently, an increase of 560%.
All of this is happening in a borough where residents are struggling with poor housing and low pay. In 2014, median net household income in Newham was just £15,704, compared to a national median of £22,204. The share of Newham owner occupiers has fallen (43% in 2001; 28% in 2012) along with the share of social housing tenants (37% in 2001; 34% in 2012). Spending on social housing has fallen at least 50% since 2010. Questioned about Newham’s levels of both poverty and debt on BBC Radio London on 12 November, Robin Wales suggested it was the ‘natural’ result of the decline of the Newham Docklands since the 1960s!
Given Robin Wales’s and Newham Council’s reckless gambling with public money, perhaps it’s not surprising to find the hotspot for fixed-odds betting terminals is in the borough – gamblers spent £3m on the machines in High Street North E12 last year, a London record. The largest casino complex in Britain is found in Westfield Shopping Mall in Stratford, from where Newham council takes a £1m cut every year. But they like to play safe with their own money – in 2015 it was revealed that Newham Council’s pension fund had £88m invested in offshore Cayman Island registered private equity funds.
Welcome to the London Labour borough of Newham – rising rents, stagnant wages (except for the Mayor, who got an increase of 4% in 2010 while public sector pay was frozen), insecure accommodation, bailiffs and evictions.’ the destruction of council estates and council homes lying empty. There are over 400 empty homes on the Carpenters Estate in the shadow of the Olympic stadium. Within Newham Labour Council, 46 councillors own or control almost 100 properties and one has 19 properties with combined estimated value of over £4.5m and collective monthly rent of over £20,000.
Labour leader Jeremy Corbyn has pledged to tackle issues at local level in Labour councils. Let’s hold him to account and demand he challenge Labour corruption, venality and greed in Newham.
Debt Resistance UK: lada.debtresistance.uk
Fight Racism! Fight Imperialism! 261 December 2017/January 2018