By Andrew Rowson
This Land Ltd's 2023-24 audited accounts
On 7th January 2025, the latest consolidated accounts of This Land Ltd, Cambridgeshire County Council's (CCC) wholly owned housing development company, were published on Companies House. The record-breaking comprehensive loss for the year to March 2024 was £11.89 million, taking the company's total losses to £50.23 million in its first eight years' of trading.
This Land's total losses are now more than double the company's entire historical revenue from selling houses (£25.04 million).
Selling houses or selling land?
Developing land and selling houses was what This Land was set up to do in 2016. This is what the Chief Finance Officer wrote then in the 10-page prospectus for the company that became This Land Ltd:
"In view of CCC’s land holdings, and the currently extremely buoyant economic
conditions for housing development, there is an opportunity for CCC to
develop its own land rather than sell it. Simply selling sites for others to
develop, and profit from, is no longer an option for CCC. The scale of the
financial challenges facing CCC requires that it has to review every
opportunity available to it in order to create an on-going revenue stream that
can mitigate the reduction in the services that it otherwise would have to
make. ...The vision is to transform CCC from being a seller of sites to being a
developer of sites."
However, because the company was unsuccessful at selling houses or turning a profit, following the government's 2020 ban on councils borrowing for yield, it began selling its own mortgaged land to property developers so that it could afford to pay its shareholder the interest on its existing loans. The property developers presumably profited, whilst This Land's losses continued to grow. In the first four accounting periods in which it made any sales, This Land's revenue from selling sites has been more than three times higher than the £25m revenue from selling houses.
In progressively selling the land it had purchased with borrowed money, but without repaying the loans to CCC, the company's land security against those borrowings fell from 85% in December 2018, to 22% in March 2024.
In August 2024, CCC agreed to lend This Land a further £5.9m (plus £400k of equity). Today This Land's land security represents barely 21% of its liabilities towards its shareholder, CCC.
This Land is still unable to pay the loan interest
A
previous post noted that as at last October (2024-25, period 7), CCC was forecasting a £5.77m shortfall in the loan interest receivable from This Land over the current financial year, on account of its cash flow problems. A month later (period 8), the forecast shortfall rose to £6.27m), or 101% of the net income from This Land that the authority relies on to balance its revenue budget. The net budget is the difference between the interest CCC pays to the Public Works Loan Board (PWLB) for borrowing the money it lent on to This Land, and the higher commercial rate loan interest income it should receive from This Land (a prime example of the outlawed practice of borrowing for yield). Going over 100% means CCC is currently anticipating that this financial year, This Land will not even be able to pay it the £2.374m needed to cover the council's own loan interest payments to the PWLB (see
here, p5).
If the above trend continues until March 2025, and This Land cannot pay any of the loan interest CCC depends on to provide frontline services to the public, then the authority will need to find up to £8.57m worth of savings elsewhere, or be forced to make service cuts (pothole repairs?) in order to balance its budget for the financial year.
For how much longer can This Land survive?
Apart from repaying a few, smaller, short term loans to CCC, This Land's sporadic repayments to date have been for loan interest only. The loan repayment schedule, set out on page 19 of
This Land Finance Ltd's latest audited accounts, show when the loan principal amounts are due to be repaid.
The £5.9m loan agreed last July (behind closed doors) is due to be repaid in February 2026.
Taking all the above information into account, if This Land Ltd is not to default on repaying the loan principal total of £120m on time, it will need an immediate turnaround from making annual losses of nearly £12m, to making annual profits of £30m on average between now and January 2029, and to convert all of those profits into cash. If one assumes This Land will break even in 2024-25 (however unlikely that may be), then the profits the company will need to make going forward to repay those loans just in time look like this:
How will This Land Ltd accomplish this task?
All the signs are that This Land is once again running out of cash. CCC's loan to the company last year appears to have been unlawful - breaching the government's 2020 ban on councils borrowing primarily for yield, and also breaching the
2021 amendments to the CIPFA Prudential Code, which made it clear that:
"borrowing for debt-for-yield investment is not permissible under the Prudential Code".
True to form, CCC has concealed the report recommending that loan, asserting that it is confidential. And so it appears that the purpose of the loan may have been to help This Land pay CCC the interest on its existing loans, thus initiating another vicious cycle. Bridgewater hedge fund founder Ray Dalio put it this way in a
recent article:
"When you get to the point that you have to
borrow money to service the debt and interest rates are rising, so that debt service payments
rise, so you need to borrow more money to pay them, you’re in what the markets
call a death spiral."
However, the growing adverse forecast variances (see above) in This Land's loan interest payments to CCC suggest that the latest loan may already have been spent on other more urgent outgoings so that there was little or none left to pay CCC the loan interest.
Where is the 2024 Business Plan?
This Land Ltd published annual business plans for
2022 and
2023. They were both public documents. Both contained wholly unreliable future cashflow forecasts, and so gave no reassurance that This Land would be able to service its existing debt and repay the nine-figure loans by their maturity dates. The 2023 business plan for example promised:
"Our cashflow modelling confirms the repayment of all loans and interest by 2029"
Just twelve months later, This Land requested, and received, a further loan of £5.9m from its shareholder.
CCC officers promised councillors that This Land's latest business plan (logically the 2024 plan), would arrive in November 2024, then in December. In January's agenda papers for the Strategy, Resources and Performance Committee, This Land's business plan (the year is no longer specified), was promised "in the Spring of 2025". It is an important document because it should explain how the company intends to turn its fortunes around so dramatically. Local taxpayers are entitled to know.
The
agenda contents document for the inaugural meeting of CCC's Shareholder Sub-Committee, to be held on 29th January 2025, announces that members will discuss the long-anticipated This Land Ltd Business Plan. According to a
report written by the Monitoring Officer in July 2024, the Sub-Committee's duties are to include approving the business plans of council-owned companies. But if this is indeed This Land's 2024 Business Plan, there seems little point in approving, or even not approving it in January 2025.
Committed to open government?
Unlike its two predecessors, the latest Business Plan is deemed confidential. No explanation is given other than that...
"it would not be in the public interest for this information to be disclosed."
The agenda contents document states that the press and public are to be excluded from the meeting before This Land's business plan is discussed. Members serving on the Sub-Committee cannot already have conducted a public interest test (as required by law) to determine whether to release the document, because their first meeting has not yet taken place. As with the loan decision last July, council officers and elected members seem determined to breach the rules and conceal vital information from the public. That is how CCC frequently conducts its business. At the foot of the same agenda contents document, the committee clerk apparently thought it appropriate to add:
"The County Council is committed to open government and members of the public are
welcome to attend Committee meetings. It supports the principle of transparency and
encourages filming, recording and taking photographs at meetings that are open to the
public."
CCC's evident intent to keep the latest business plan from the public cannot but heighten taxpayers' concerns that This Land Ltd still lacks a credible plan to extricate itself from its debt-induced death spiral. If/when the company collapses, possibly bringing down the County Council with it, it will be long-suffering local taxpayers who will pay for CCC's incompetence and lack of effective governance since 2016 in the form of much higher council tax and service cuts.
For the record, the councillors on CCC's new Shareholder Sub-Committee who have the authority and the duty in the public interest to publish This Land's latest Business Plan on 29th January and support the principle of transparency by holding the agenda item 5 discussion in the open are:
Cllr David Ambrose Smith,
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