Being economical with the truth - Cambridgeshire County Council style

By Andrew Rowson

Cambridgeshire County Council (CCC) is desperate to conceal the scale of losses made by its wholly owned housing development company, This Land Ltd (TLL).  In addition to the £50 million official losses accumulated in eight years of trading up to March 2024, the council has had to face up to the likelihood of not recovering all or any of the £120 million it has loaned to its subsidiary.  In previous years TLL always claimed it was on track to repay all the loans and interest payments on time.  

But, due to This Land's declining performance, CCC's auditor KPMG says there is a "significant risk" CCC will be unable to recover the full value of the loans as they fall due between 2026 and 2029.  It has told the council to produce an Expected Loss Provision (ECL) in its latest accounts (to March 2025) to disclose what fraction of the outstanding debt it considers unrecoverable.

In March this year, in a secret meeting, the council's Executive Director of Finance decided the fraction of unrecoverable debt should be 50%, or £59.85 million.  That taxpayers' money has now been written off and is an expense in CCC's 2024/25 draft accounts.  In addition, because This Land's liabilities are at least £44m greater than its assets, the council's £5.85m investment in This Land's shares is now worthless and it too has been written off.  The total crystallised loss comes to £65.7 million.  In the Narrative Report section of CCC's draft accounts for the 2024/25 financial year, the Executive Director of Finance and Resources, Mr Michael Hudson, described this action as the council exercising "strong and sound judgement". 

The Council however insists it is not a write-off.  Instead it is calling it a loan restructuring, and a "conversion" of half the outstanding loan into a £59.85m "capital grant" with no interest to pay.  KPMG has promised to investigate these unconventional arrangements during this year's audit.  In its audit plan in June, KPMG wrote: 

"...given that the restructuring of the debt can have significant and complex accounting and legal implications, we expect there to be a significant risk."

One accounting and possibly legal implication might relate to the claimed capital nature of the "grant".  The original loans from CCC were to enable This Land to purchase surplus land and buildings from CCC's extensive property portfolio and develop them at a profit.  Instead, since 2020, This Land has disposed of the lion's share of its property (at least £78m worth), mostly at a loss, to eager developers who have presumably gone on to make profits.  The sale proceeds from those disposals were not used to pay off the mortgage loans, but were retained by TLL, partly to pay its own staff (up to £235,000/year  for the CEO) and to pay CCC the £8.56m annual loan interest charge.

Thus, at the 2023/24 balance sheet date (31 March 2024), This Land's own audited accounts show that the land security against its outstanding borrowings of £113.85m was just £25.4m.  The remaining security had been thrown away - all with CCC's express written consent - when it allowed TLL to sell off the mortgaged land.  Which officer gave that consent to throw away that taxpayers' money?  Since March 2023 it has been the current Executive Director of Finance and Resources himelf, with the minuted approval in committee of elected members on the Council charged with governance of This Land, and also charged with looking after our money.

It follows that at least 58% of what CCC is calling a "capital grant", is not backed by capital at all, but is simply a write-off of unsecured debt.  An unsecured debt write-off cannot be converted into a capital grant whose cost is amortised over the useful life of non-existent underlying assets.

At the end of June 2025, CCC's Shareholder Sub-Committee was presented with a report showing cashflows in and out of the council relating to This Land.  The cash inflows are shown as being marginally higher than the outflows.

According to CCC, that means  no taxpayer's money has been lost.  But the chart omits significant cash outflows and fails to mention the write-offs which are relevant flows, representing taxpayers' money.

The key to the chart above shows loan interest TLL has already paid to CCC (£42.6m) and future interest it may pay (£21m).  But it does not show the interest CCC is having to pay the Public Works Loan Board on the loans the council itself took out to lend on to This Land in first place.  At around 2.08% interest, that adds up to around £27.5 million up to March 2030.  It is evidently a relevant cost in measuring This Land's performance.

When the shareholding and £59.85m loan write-offs are added, the left-hand side of the chart is now £89 million higher than the right.

CCC is keen to mention the £42.6 loan interest TLL has paid it up to 2023/24.  When the corresponding loan interest to the PWLB is taken into account, the net loan interest revenue falls to below £30m, which is less than half the cost to the taxpayer of the recent write-offs that CCC conveniently omits from the narrative it is peddling, though it insists that This Land is a going concern. 

Which mortgage lender in the real world would allow its borrowers to sell £78 million worth of mortgaged property without repaying the mortgage principal, and then bail them out to the tune of a further £60 million?