An open letter to the leader of Cambridgeshire County Council

 

By Andrew Rowson

"Holders of public office are accountable to the public for their decisions and actions, and must submit themselves to the scrutiny necessary to ensure this."

(Nolan Principles)

Dear Cllr Nethsingha,

Please answer the questions

I wrote to you twice last December asking you several important questions that you failed to answer.  Since then, Cambridgeshire County Council's (CCC) wholly owned subsidiary housing development company, This Land Ltd, has had its audited 2023/24 accounts published on Companies House.  They show a comprehensive loss of £11.9m for the year, bringing cumulative losses to just over £50 million.  

In recent days KPMG has issued a disclaimer of opinion on its audit of the council’s accounts and the group accounts, partly because CCC did not provide it with sufficient audit evidence about the recoverability of the authority’s £113.8m long-term loans to This Land Ltd.  After reviewing This Land's financial position and performance against business plan, the auditor now considers there to be a significant risk of CCC suffering credit loss as a result of This Land's declining financial position.  

CCC currently holds only £25.4m of land security against the risk of non-payment by its subsidiary.  The reason why the council’s land security fell from £80.5m in December 2019 and now only represents 22% of its exposure to This Land is that, since the government’s 2020 ban on councils borrowing from the PWLB for commercial yield, This Land has kept itself afloat only by selling mortgaged land without repaying the mortgages to its lender, CCC.  It has apparently done this with CCC’s full knowledge and approval.  The lawfulness of that arrangement was the subject of my objection to the accounts last summer, which KPMG is still investigating.

Since you declined to answer my questions, I am putting two of them to you again in this open letter, which is published online, together with another question about This Land Ltd that urgently requires answering.  As the Council Leader and Chair of the Strategy, Resources and Performance Committee (SR&P), you are the right person to answer all three questions.

“...given the complexities and risk involved in considering the most appropriate commercial options for This Land, and for the Council’s other subsidiaries, we do not consider that the Strategy, Resources and Performance Committee can effectively carry out its oversight role without further training and expert input.”

KPMG: Independent auditor’s report to the members of CCC 2023/24 financial statements

Question 1

Last July, did you know about the forecast adverse variance in This Land’s loan interest payments to CCC at the time you and the SR&P Committee voted in closed session to lend This Land a further £6.3 million?  If you did, that would seem to confirm that the decision was even more reckless, because no rational lender would lend millions more to a company that was already failing to pay interest on its existing debt – even if the new loan was lawful, which this one allegedly was not.  If you did not know, it appears you must have been asleep at the wheel, because in the finance monitoring report presented at the same July meeting, your Executive Director of Resources and Finance, Mr Michael Hudson, deliberately concealed This Land’s figures in the Appendix 1a table (see below).  That doctored report should at the very least have prompted questions from committee members, and from you in particular.

Question 2

In December, I asked you for the uncensored version of that period 2 finance monitoring report that would reveal the figures of the individual Investment Activity items (including This Land), that Mr Hudson removed from the version presented to your committee (see arrow below).  

All the Appendix 1a tables published in earlier SR&P Committee meetings, and all those in meetings since last July duly showed the full detail of all six Investment Activity items.  Here for example is the Investment Activity budget line presented at the March 2025 committee meeting, with This Land’s forecast £7.414m adverse outturn variance highlighted.

Can you please send me, or ask Mr Hudson to send me the uncensored version of that Period 2 report showing the figures for the six Investment Activities as they should have appeared at last July’s meeting?  At last December’s full council meeting you claimed to have “absolute confidence in the officers and the people involved in this Council in the management of This Land.”  On this evidence that confidence looks misplaced.  It should not be a problem for you to obtain that complete report from Mr Hudson and send it to me.  No doubt other local taxpayers would be interested in seeing the missing details. 

Question 3

When was the decision made to allow This Land to defer loan interest payments to CCC, as reported in the agenda papers of this month’s SR&P Committee meeting?

“Following additional financial support provided to the company through 2024-25, including a deferral of interest payments to the council, the revised business plan would require further support to the company through restructuring of existing loans.”

The above statement appears to contradict what Mr Hudson wrote in the key risks section on p123 of CCC’s audited 2023/24 financial statements:

“The Council’s credit risk exposure to its customers and entities that it loans funds to (such as This Land Ltd) is monitored and regularly reviewed to ensure that money owed to the Council is paid as it falls due.  The value of these amounts is impaired if it is felt that this debt would not be recoverable.”

Clearly, This Land’s loan interest payments have not been paid on time during the current financial year, or perhaps even at all, as evidenced by the January 2025 finance monitoring report which shows This Land loan interest payments £7.414m short of the net revenue budget of £6.191m (see above), with two periods still to go.

This too is an important question because at last October’s SR&P Committee meeting, Mr Hudson wrote:

“While we anticipate being on budget for income from This Land in 2024-25, there is a risk that we will not be, and even if we are, it is likely to be prudent to transfer additional funds to earmarked reserves to further mitigate any risks in the medium term.”

Anticipating being on budget is inconsistent with allowing This Land to defer interest payments.  The council has been opaque for months on this subject.  For the sake of clarity, please explain:

·        When did the authority make the decision to defer This Land’s interest payments?

·        Which CCC committee approved that decision, and at which meeting?

·        Why has the council only now admitted to that deferment?

·        Does that deferment - which from the council's budget seems to extend well into the next financial year - not amount to improper state aid to the authority's supposedly arm's length company?

I am sorry to have to ask these questions in an open letter, but since you persist in not answering them, whilst telling the public that you always seek to be as open as you can, I have no other course of action.

I look forward to receiving your response with the requested information in the very near future.

Yours sincerely, 

Andrew Rowson