Alleged senior officer fraud, corruption and six-year cover-up at Cambridgeshire County Council

A letter to Cambridgeshire County Council's Service Director, Human Resources

24^th August 2024

Dear Ms Atkin,

Your role in former CFO Chris Malyon’s unlawful £38,000 pay rise and cover-up of undisclosed non-executive directorship fees in 2016/17 and 2017/18.

I am addressing this letter to you because you are the sole remaining senior officer at Cambridgeshire County Council (CCC) who was directly involved in former Chief Finance Officer Chris Malyon’s unlawful £38,000 salary rise in 2017/18.

You may be aware of the analogous case at Northumberland County Council, where the CEO, Daljit Lally, received “international allowances” of £40,000/year that were unlawful because:

a)       They did not comply with the authority’s pay policy statement under s38 of the Localism Act, and

b)      They were not authorised by a decision made by the full council

Following a legal opinion by Mr Nigel Giffin KC in May 2022, the s151 Officer had no alternative but to issue a Section 114 notice on the grounds that the Council or one of its officers or employees had made a decision which involved the Council “incurring expenditure which is unlawful”.

You know that the same applies to Mr Malyon’s £38,000 pay rise in 2017/18.  The secret pay rise did not comply with the authority’s March 2017 Pay Policy Statement (which left Mr Malyon’s salary band unchanged over the previous year at £95k-£100k - see graph below).  In addition, his substantial pay increase over and above the agreed salary band was not the result of any decision taken by a properly authorised decision-maker.  CCC’s pay policy statement for 2017/2018 states unambiguously:

There were no amendments to the policy during 2017/18.  That is evidenced by the absence of amendment resolutions by the full council after the pay policy statement itself was approved by the full council on 27^th March 2017.

The real explanation for Mr Malyon’s unauthorised pay rise in 2017/18, as you know, is that it was to disguise the fact that he had been benefitting from non-executive directorship fees (NED) from Cambridge & Counties Bank (CCB, a company 50% owned by CCC), which he had failed to disclose in the county council’s financial statements he had a statutory duty to prepare and certify as being true and fair.  It is possible Mr Malyon may have stolen up to or even over £200,000 from local taxpayers in this way as far back as 2013/14 (see p8 below) by the time he was secretly awarded that £38,000 pay rise, evidently to spare CCC’s blushes.

Senior council officers, including the current CEO, have been keen to draw a line under this and other scandals that they were briefed on, that were the subject of multiple objections to the accounts over several years, and which took BDO up to six and a half years to produce whitewash statements of reasons for.  But the facts remain that:

a)     According to Counsel's opinion, BDO (and EY) acted contrary to law in failing to thoroughly investigate the objections they had accepted for consideration under s27(3) of the Local Audit & Accountability Act 2014, and

b)      CCC lied to both audit firms, providing them with knowingly false information about Mr Malyon’s pay rises and other matters that the auditors may have relied on before producing their whitewash reports.

This scandal is not going away just because two firms of so-called independent auditors did their client’s bidding and were complicit in Mr Malyon's alleged abuse of position fraud and/or the subsequent cover-up.  Indeed, you may be aware that only last week, PwC was fined £15 million by the Financial Conduct Authority for failing to report concerns about one of its clients’ fraudulent activity.  A few months ago, the last government spoke about scaling up the fight against those stealing from the taxpayer.  Since the organisations paid by Cambridgeshire taxpayers have declined to act, it is therefore absolutely in the public interest that CCC’s conduct, BDO’s and EY’s conduct, as well as Cambridgeshire Constabulary’s conduct in relation to this episode be aired in public and escalated to the highest authorities.  Furthermore, the fact that it happened six and seven years ago does not make it any less serious.  On the contrary.  Two political administrations under two Chief Executive Officers have attempted to bury the truth and mislead auditors and the police for many years.  That is a damning indictment of the corporate and political culture at Cambridgeshire County Council which, in my opinion, remains institutionally corrupt at the very top.

In this letter I shall go through the part you played in covering up Mr Malyon’s unlawful pay rise.  At the end I shall ask you some questions which I expect you to answer.  Your name appears in CCC's Corporate Leadership Team structure, and even though the word “accountable” was dropped from it earlier this year, that does not relieve you of the duty to submit yourself to the scrutiny necessary to ensure you are accountable for your decisions and actions, as set out in the Nolan Principles.  If I have missed anything in my analysis, I would be grateful if you could assist me.  If you choose not to reply, the public and the relevant authorities will be informed.  I suggest it would be in your personal interest to reply, and with candour. 

Background

On 11^th July 2018, former County Councillor Mike Mason wrote to BDO audit partner Lisa Blake (née Clampin) with an objection to CCC’s draft 2017/18 financial statements.  CCC Finance was copied in.  One part of the objection was about CFO Chris Malyon’s £38,000 pay rise that year to £143,925.  With CCC’s pension contribution on top, Mr Malyon’s total remuneration rose by £45,792 (36%) over the prior year.  There was no formal approval by the full council for that or those pay rises.

On 26^th July 2018, BDO published its audit completion report (ISA 260) for presentation to the Audit & Accounts Committee (A&A) four days later.  On page 18 of the report, under the audit risk labelled “Senior officer remuneration” the auditor wrote:

“The prior year audit identified errors in the disclosure of senior officer remuneration, including inconsistencies with the applicable guidance, omission of remunerative benefits required for inclusion and inaccuracy of other remuneration values disclosed.

Disclosures relating to senior officer remuneration are considered to be material by nature.”

These comments are discussed in more detail below.

On 6^th August 2018, CCC’s final accounts for 2017/18 were signed off by the CFO and Lisa Blake (at the time, Lisa Clampin), without disposing of Mr Mason’s objection from four weeks earlier.

On 9^th October 2018, following a meeting Mr Mason and I had with Lisa Blake, Mr Mason wrote to the auditor and the CEO (Gillian Beasley), and sent every member of the A&A Committee (Chairman: Cllr Shellens) a hard copy of the letter and several attachments.  One attachment - (Document F), which Mr Mason and I had prepared, went into more detail (21 pages) about Mr Malyon’s unlawful 2017/18 pay rise.  In it, Mr Mason asked Mrs Beasley to provide evidence of Mr Malyon’s revised contractual terms and conditions.  The CEO ignored his request.

Ten days later, on 19^th October 2018, you produced a document - CM.docx, which contained three embedded documents.  Clearly the council’s response to Document F, it was handed to BDO to explain Mr Malyon’s pay rise.  As I set out below, it was full of falsehoods intended to mislead the auditor.  In later years it would mislead another auditor, EY, and also Cambridgeshire Constabulary’s Specialist Fraud Investigation Team.

Regrettably, BDO, EY, Cambridgeshire Constabulary, the A&A Committee, Council Leaders and CEOs all appear to be easily duped, or else they decided to support the false narrative, knowing it to be false.  Whatever the cause of their inaction, that does not detract from the untruths you wrote in that document. 

On your own admission, you authored CM.docx, and the two embedded Word documents have your maiden name attached (Janet Maulder).  The first is dated but unsigned.  The second is signed but undated.  The second Word document looks like this in the original Word format.  It seems to have been created in a hurry, since the pagination is askew, and it is hard to believe you sent that letter to Mr Malyon, least of all in that state.  Those letters and CM.docx itself put you close to the centre of the cover-up of the cover-up, if not of the original alleged fraud and corruption.  I have no doubt you acted on Mrs Beasley’s, or perhaps Mr Malyon’s instructions, but again, that is no justification for producing false evidence, especially given your position as Head of HR. I believe you knew that what you wrote was incorrect and dishonest.

Mr Mason only saw CM.docx two years later, after I shared it with him.  BDO did not share it with Mr Mason, contrary to the NAO’s Code of Audit Practice. 

 

Timeline and analysis of a cover-up

According to the NAO’s Code of Audit Practice, local auditors should use best endeavours to complete their investigations of objections they have accepted for consideration within six months (paragraph 5.6).  After two years of BDO failing to conclude its objection into Mr Malyon’s pay rise, I corresponded with the then Chair of the A&A Committee, Cllr Mike Shellens, about it.  By August 2020 he had been ducking and diving for some time.  Unsurprisingly, he failed to produce any evidence to support the lawfulness of the pay rise, because there was none.  He thus turned to the CEO for assistance.  This email string contains correspondence between Cllr Shellens, me, Mrs Beasley and you in August 2020.  The emails are untouched apart from my correcting a minor typo in Cllr Shellens’ email to me in which he also displayed his ignorance of Greek mythology.  The emails should be read from the bottom up.

Cllr Shellens perhaps did not intend to show me the entire correspondence, but his unwitting audit trail evidence of complicity is useful.  Mrs Beasley’s comments about me in her 9^th August email for example are not what one would expect from a CEO with nothing to hide.

In your email to Mrs Beasley on 10^th August 2018, you attached CM.docx, which contained two embedded Word documents, apparently created by V Robertson and S Greene, and a copy of the Staffing & Appeals Committee (S&A) minutes from 8^th September 2016.

In CM.docx, which in your email you admit to preparing, you produced one lie after another that are simplicity itself to expose. 

You created the document on 19^th October 2018.  That was ten days after Mr Mason sent his letter and attachments (including Document F) to Mrs Beasley and Lisa Blake of BDO. 

CM.docx was plainly intended to misinform BDO.  In fact, it is worse than that.  Remember, this was more than two months after BDO had published its unqualified audit opinion on the 2017/18 accounts, despite the acknowledged risk of fraud and materiality by nature of senior officers failing to disclose remunerative benefits.  By this stage Ms Blake was clearly complicit with Mrs Beasley’s unlawful and secret decision to award Mr Malyon the pay rise as a way of covering up his undisclosed NED fees from CCB that the auditor claimed she had identified during the previous audit (see ISA 260 extract above).  Nevertheless, even if Ms Blake had taken the objection seriously, the most perfunctory checks on your note’s contents would have revealed the fabrications, as explained below.

“On 8^th September 2016 Chris was interviewed by Staffing and Appeals Committee and formally appointed to the Deputy role, for which there is a £10k annual special responsibility allowance.” 

There was no interview, and there was no £10k annual special responsibility allowance for the Deputy CEO role, at least not according to the official minutes.  If Ms Blake had bothered to open the minutes of that meeting (which you embedded in the document), this is what she would have read:

You repeat the lie about the interview in the first embedded word document, which is unsigned.  You begin with the improbable opening sentence:

“Further to your interview with Staffing and Appeals Committee on 8^th September 2016…”

If there had been an interview, why was it not mentioned in the minutes?  There is no evidence in the minutes or elsewhere that Mr Malyon even attended the meeting, and there is no mention of any other candidate.  As for the £10,000 allowance, that was not mentioned in the minutes or in any other public document before or since.  You mention it again in that same embedded document:

“You will receive a Special Responsibility Allowance of £10,000 per annum, paid monthly, in recognition of this role.”

On whose authority?  Certainly not the full council.  Had the role come with a £10,000 allowance, it should have been reflected in the March 2017 Pay Policy Statement or in an amendment resolution by the full council, as per the policy (see p1 above).  It was not.  You or Mrs Beasley or Mr Malyon concocted the £10k annual allowance falsehood in 2018, and BDO appeared to accept it without challenge.

“Later in 2016 the decision was taken to repatriate the Chief Finance Officer post from LGSS back to CCC, maintaining the responsibility for the professional finance function.” 

Another lie.  In CCC’s 2017/18 Pay Policy Statement, which was approved by the full council in March 2017, Mr Maylon’s role is still shown under the LGSS directorate, (Local Government Shared Services) not CCC.

“In addition, the Council commenced a review of corporate capacity and services which led to this role taking on responsibility for additional services from January 2017.”

Lie number four.  At the 8^th September 2016 meeting, immediately before the item on appointing the Deputy Chief Executive (with no additional pecuniary benefit) was an agenda item called “Review of the Council’s Senior Leadership Arrangements.”  The official minutes record:

“The Committee received a report detailing a proposed review of the senior leadership structure of the Council. The resignation of the Executive Director: Children, Families and Adults (CFA) and the current interim arrangements for the Director of Children’s Services required the review of the CFA Directorate as a priority.”

There was no mention of the CFO’s role or responsibilities.

At the following meeting of the same committee on 27^th September, one agenda item – discussed in private session, was the appointment of an interim executive director for children, families and adults (Wendi Ogle-Welbourn).  Again, the CFO’s role was not mentioned in the minutes.

The December 15^th 2016 meeting of the S&A Committee included an agenda item called “A Confidential Review of the Leadership Structure for Children, Families and Adults”.  But nothing in the minutes to that meeting mentions additional responsibilities for the CFO role.  Perhaps I missed something. If so, please enlighten me.

Looking further ahead, the 24^th January 2017 meeting was dedicated to the leadership review of the CFA Directorate – not the CFO or Deputy CEO.

The meeting after that, on 21^st March 2017 included the Pay Policy Statement for the 2017/18 financial year.  As noted above, Mr Malyon was still under the LGSS Directorate, and his salary band remained unchanged from 2016/17 in spite of his new Deputy CEO title awarded six months earlier:

The minutes to that meeting contain an interesting comment:

“A Member queried the reference in paragraph 4.3 of the Chief Officer Pay Policy Statement that “The Chief Executive determines the level of increase, if any, to the published pay rates for Chief Officers…”, as it was the Member’s recollection that such decisions had previously been brought to the Staffing and Appeals Committee. It was confirmed that whilst such decisions had been endorsed by the Committee in the past, there was no requirement to do so. The Member suggested that for reasons of transparency and potential conflict of interest, consideration by the Staffing and Appeals Committee should be included as part of the process.”

The remaining S&A meetings during 2017 feature interviews and further discussion about the leadership of the CFA directorate, but the S&A Committee remained mute on the CFO’s role.

Throughout this period, in no meeting of the full council is an amendment resolution to the pay policy statement even mentioned, let alone a salary rise for the CFO proposed or approved.  Clearly, neither auditor (nor Cambridgeshire Police’s Specialist Fraud Investigation Team) fact checked anything they were told by CCC management in relation to Mr Malyon’s pay rise.  The auditors exhibited no professional scepticsm, as the law requires.

The first time the S&A Committee met in 2018 was on March 6^th to discuss the 2018/19 Pay Policy Statement, which is found here.  This is how Mr Malyon’s figures had changed:

That Pay Policy Statement was again produced by the Chief Executive, Gillian Beasley.  Her title is on the cover of the corresponding agenda item document.  All the documents from that meeting can be found here.

In that Appendix 2(a) document, Mr Malyon’s salary band shot up from £95k- £100k in 2017/18 to £116k- £133k in 2018/19 – an increase of up to 33%.  Members of the S&A Committee were not shown Mr Malyon’s correct 2017/18 pay policy statement salary range for comparison (£95k - £100k).  Instead, they were shown a completely false “current salary range” of £125k-£130k, which made the CFO’s new salary range look perfectly reasonable.  In fact, the mid-point of the new salary range, at £124.5k was actually lower than the mid-point of the bogus “current salary range”, at £127.5k.  It is therefore hardly surprising that no member commented on Mr Malyon’s pay rise at that 6^th March 2018 meeting – as the minutes show.  They were lied to and deliberately misled.

Taking into account the facts that:

a)       No public document exists to substantiate any salary rise or award of allowances to Mr Malyon during 2016/17 or 2017/18 other than the two annual pay policy statements (see above), and

b)      there is no evidence in the public record of the full council ever approving any additional salary rise or allowances in 2016/17 or 2017/18,

the Chief Executive’s 2018/19 pay policy statement above is, in my opinion, irrefutable evidence of her dishonesty and complicity in covering up Mr Malyon’s unlawful mid-year pay rise(s) in 2017/18.  It also shows her intent to deceive members of the S&A Committee (and thereafter the full council) into approving Mr Malyon’s disproportionate pay policy rise in 2018/19 without challenge.  I can find no innocent explanation for the entirely false “current salary range” figures, especially since it was Mrs Beasley herself, only a year earlier, who had set out the correct pay policy statement review process (see page 1 above).

The date of Mrs Beasley’s 2018/19 pay policy statement (March 6^th 2018) came well before Mr Mason’s 11^th July objection and Document F in October.  That means that in March 2018, Mrs Beasley was already aware of Mr Malyon benefitting from the CCB NED fees.  Instead of disciplining him and/or immediately dismissing him, the CEO allowed him to keep the undisclosed benefits while she attempted to sanitise the situation with the falsified, unlawful and retrospective “current salary range” figures in respect of 2017/18, and the Mr Malyon’s heavily disguised 33% pay rise for 2018/19.  She apparently thought she could slip them past elected members and the public without either noticing.  She was 50% successful in that endeavour.

By the time Lisa Blake signed her 2017/18 audit opinion on 6^th August, with nothing to report, Ms Blake too was aware of the CFO and Deputy CEO stealing from the taxpayer.

In her July 2018 ISA 260 report, Ms Blake’s comment quoted on page 3 above about identifying the senior officer’s “omission of remunerative benefits” during the prior year audit makes no logical sense.  For, if it were true, why did she not mention it at the time, during that earlier audit, and why did she not insist that her client correct the omission in the final 2016/17 accounts?  The public record shows that there were no corrections or adjustments to any senior officer’s salary figures between the draft and final 2016/17 accounts.  Had they been corrected, the final accounts should have shown £145,885 salary, allowances etc. for Mr Malyon, £40,000 higher than the £105,885 disclosed in the 2016/17 draft accounts.  £40,000 was the prior year CCB NED fee for Mr Malyon’s services, as acknowledged in footnote 4 of the senior officer remuneration table on p66 of the 2017/18 audited accounts.

Ms Blake lied in that July 2018 ISA 260 report.  Twelve months earlier, she had no idea about Mr Malyon’s undisclosed NED fee benefits.  She only learned about them fifteen days earlier, when Mr Mason spelled it out in his 11^th July objection.

So why did Ms Blake let the cat half out of the bag by mentioning it at all?  One can only speculate.  My guess is that as at 26^th July, only eleven days before the 2017/18 accounts were signed off, perhaps Ms Blake was undecided whether to reveal the CFO’s dishonesty in her final audit opinion.  If she were to do that, she would have looked foolish not even mentioning remunerative benefits in her ISA 260 report.  In the end though, perhaps she was “persuaded” by the CEO and/or CFO into saying nothing, despite the apparent abuse of position fraud, and despite the acknowledged materiality by nature of those omitted disclosures, because that is how corrupt councils and their sometime corrupt auditors operate.

Two years later, in an unguarded moment in October 2020, Ms Blake admitted to me in a phone call that the “omission of remunerative benefits required for inclusion” in her July 2018 ISA 260 report was a reference to Mr Malyon’s undisclosed NED fees from CCB, which he effectively stole from the taxpayer at least as far back as 2016/17 (£40,000), and possibly as far back as 2013/14 (see below).  Such conduct, which is wholly in keeping with Mr Malyon’s track record for dishonesty and feathering his own nest (see also here and here), also raises the issue of whether he concealed those NED fees from HMRC.  That is a separate issue I have taken up elsewhere.  But, armed with the known facts, Ms Blake should have acted in accordance with ISA 240 (The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements).  She should have alerted the police.  The fact that she did not do that but instead appeared to collude with Mrs Beasley’s cover-up is one more testament to her lack of independence and her venality, in my opinion.  The toxicity of such information being revealed publicly perfectly explains CCC’s multiple cover-ups over the last six years, in which you played a part, and the alleged cover-ups, collusion or staggering incompetence shown by two so-called independent auditors paid many hundreds of thousands of pounds of Cambridgeshire taxpayers’ money for their statutory services supposedly in the public interest. 

I did not make a recording of the phone conversation with Ms Blake, but, as I recently told Chief Constable Nick Dean and my Member of Parliament, Dr Ian Sollom, I would be happy to state under oath in a court of law that Ms Blake did admit that to me over the phone in October 2020.

 

A series of non-coincidences

Between November 2013, when Mr Malyon became a non-executive director at CCB, and 2018, these were the non-executive director fees CCB paid in cash for his services:

CCB's accounting year ends are 31^st December, whilst CCC's financial years end on 31^st March.

Mr Malyon therefore may have stolen over £200,000 of taxpayers’ money that should have gone to CCC before his dishonestly was rewarded with the unlawful £38,000 pay rise in 2017/18.  Together with subsequent pay rises (see graph on p2 above), that set him up for a substantially larger pension on his retirement in March 2021. 

Cambridgeshire taxpayers may be paying for this alleged corruption for decades to come.

It is no coincidence that Mr Malyon’s £38,000 pay rise plus £7,000 pension contribution increase in 2017/18 comes to slightly more than the £45,000 NED fee for his services at CCB in 2017/18.

It is no coincidence that after Mr Mason included Mr Malyon’s pay rise in his 2018 objection to CCC’s accounts, and BDO accepted it for consideration, it took the firm a further five and a half years, and much chivvying from CCC’s Chair of the A&A Committee, from Finance officers (though not Mr Malyon himself) and the current CEO before BDO finally produced its statement of reasons in January this year - three years after Mr Malyon’s retirement, and two and a half years after Mrs Beasley OBE retired.  The statement of reasons was predictably a whitewash.  It could not be otherwise, because to have recorded the truth would have meant BDO admitting Ms Blake had been wilfully blind or party to the alleged criminal conspiracy and cover-up of Mr Malyon’s unlawful pay rise in 2017/18 and his undisclosed NED fees in 2016/17 and possibly earlier years.

It is no coincidence therefore that BDO’s statement of reasons was finally signed off on 29^th January this year not by Lisa Blake, but by Ciaran MacLaughlin, a BDO partner who joined the firm barely seven weeks earlier.

It is no coincidence that two days later, on 31^st January 2024, Lisa Blake, BDO’s National Head of Public Sector Assurance, retired altogether from BDO at the age of 55.

There is one more non-coincidence.  The above-mentioned ISA 260 report in which Ms Blake acknowledged the omission of senior officers’ prior year remunerative benefits required for inclusion, was dated 26^th July 2018.  That is also the date Mr Malyon tendered his resignation from CCB as a non-executive director, after four years and eight months in the role.  CCC has never explained why he stepped down.  Companies House records Mr Malyon’s termination as a director on 26^th October 2018, exactly three months later.  CCB’s audited accounts state that NEDs may be terminated by either party upon three months’ written notice:

My questions to you

I mentioned above that I have no doubt Mrs Beasley or Mr Malyon instructed you to prepare CM.docx and give the note and perhaps the embedded documents to BDO.  Nevertheless, as head of HR, you did play a part in this scandal that has rumbled on for six years, and resulted in whitewash reports from BDO, EY and Cambridgeshire police.  So, in the interests of accountability, I am asking you to answer the following questions:

1)      As head of HR, even in 2016, when did you first become aware of Mrs Beasley’s concerns about Mr Malyon benefitting from undisclosed non-executive director fees from CCB?

2)      Do you have any alternative explanation for Ms Blake’s comments about the omission of a senior officer’s “remunerative benefits required for inclusion” in her July 2018 ISA 260 report?

3)      Do you acknowledge that your statements from CM.docx analysed above are false statements?  If not, please explain the following contradictions:

a.       The S&A minutes of 8^th September 2016 failing to mention Mr Malyon’s interview or any allowance coming from the Deputy CEO role,

b.       The March 2017 pay policy statement failing to reflect Mr Malyon’s “£10,000 annual special responsibility allowance”

c.       The lack of any evidence in a public document of a review of corporate capacity concerning the CFO, or regrade etc. resulting in increased remuneration in 2016/17 or 2017/18,

d.       The lack of any evidence in a public document of any full council approval of any increase in Mr Malyon’s pay in 2016/17 or 2017/18 apart from the two annual pay policy statements.

4)      The two embedded Word documents were created by two different people.  Can you explain why you did not create them?  The apparent creation dates were 13^th September 2016 and 16^th July 2017 respectively.  Were these the true creation dates, or were the Windows automatic date and time settings on a laptop temporarily overridden with earlier dates before those documents were created and saved?

In this letter I have gone a little outside your immediate involvement in the cover-up, because this is for public consumption and the public needs to have the whole picture.  If I have been wrong in any detail above, I hope you will correct me with facts and evidence.  I look forward to receiving your considered response at your earliest convenience.

Yours sincerely,

Andrew Rowson

County Councillor Mark Goldsack Quotes

 

Assets and Procurement Committee – 28 November 2023

Agenda Item 6 – This Land – Publication of Shareholders Agreement

Click here for Source – Timestamp 47.25

Cllr Mark Goldsack

“Thank you Chair.  I really welcome the Shareholder’s Agreement, openness and being able to see this in a public meeting.  And I think it’s a real step in the right direction.  As part of the debate of this section I would encourage everyone involved with This Land to go further, and further disclosure.  There’s a lot of disinformation and misinformation in the public domain about the operation of This Land.  And that affects people’s judgement and people’s perception of the reality of the situation.  I have spoken to the Chair of This Land direct, and asked for better communication out to councils – parish councils, town councils and the like.  But I see this very much as a step in the right direction, and I would encourage all those involved – Tom and Michael etc. to really push for more information out there – factual information that does counter some of the disinformation that circulates out there.  Unfortunately, we live in an era (and I’ve used this phrase many times), but we live in an era of social media.  And on social media, noise wins over fact.  So we have to make sure that fact stands absolutely true out there.  So, thank you for bringing this.  I look forward to more.”

Perhaps Cllr Goldsack could start the ball rolling by providing just two examples of where in the public domain, or social media, anyone at all has circulated disinformation and misinformation about This Land, and in what way that information was incorrect.  Cllr Goldsack has a tenuous relationship with factual information, as evidenced by this item from Private Eye’s Rotten Boroughs column published on 3^rd March 2021, about an earlier meeting of Soham Town Council, which the Councillor attended.

Rotten Boroughs, 3 March 2021

Private Eye’s facts were correct in every particular.  This Land’s inability to make its loan interest payments to CCC on time, and the fact it was forced to sell land purchased with those loans just to stay afloat was acknowledged on page 22 of CCC’s own financial statements for the 2020/21 financial year:

“During 2019-20, This Land undertook a significant review and reset of its business plan necessitated by revised assumptions showing a deteriorating financial position. The company had experienced delays achieving planning permission and was concerned its original plan was unduly optimistic and by the future overage obligations it had to the Council. A revised plan was submitted to the Council’s Commercial and Investment Committee in April 2020, with the Committee agreeing, for the Council’s part, to a number of updates and variations arising from the updated approach. Amongst the revisions was a commercial decision by This Land to dispose of a number of assets: refocusing on those of an optimum size and position for the company. By 31st March 2021, five disposals had been made and further disposals were completed during 2021-22. The sales have progressed in a relatively buoyant housing market, thus allowing the company to maximise returns and select the best timing and circumstances for individual sales. The proceeds from these disposals have put the cash flow of the company into a position where less borrowing has been needed from the Council than previously anticipated during 2020-21.

Other significant revisions within the 2020 business plan included a reduction in the Council’s future entitlement to planning overage uplifts from This Land, an increase in the permitted levels of lending to the company in principle (although detailed approval of draw down requests are required to access this and actual lending is currently below the level authorised in 2017) and adding land promotion as a further area of business activity for the company. Adoption of the revised business plan enabled the Council to advance loan amounts that had previously been on hold and in turn This Land could ensure it was up-to-date with previously delayed interest payments back to the Council.”

How transparent is This Land?

If Councillor Goldsack is keen to show transparency, perhaps he could comment on the following.

This Land’s Shareholder Agreement, which is now published, contains a section on Freedom of Information

In fact, requests for information about This Land do not have to go via the County Council.  Since it is a publicly owned company under Section 6 of the Freedom of Information Act 2000, anyone can address FOI requests directly to This Land Ltd, rendering section 11 of the Shareholder Agreement redundant.

In all seven of This Land’s audited accounts published to date on Companies House, a material proportion of its administrative expenses was omitted from the corresponding note to the accounts.  In total, that lack of transparency comes to £8.98m, 46% of its total administrative expenses over seven years - and the equivalent of 23.4% of This Land’s comprehensive losses so far.  

By any measure, those omissions are material.  The unsystematic way in which a large proportion of This Land’s administrative expenses (but no other item of account) has been omitted from the notes to its own audited and published accounts breaches the disclosure requirements set out in Financial Reporting Standard 102 on financial statements (FRS 102), in particular, sections 2.4-2.7, section 8 and sections 2.10 and 2.11.

The missing categories and their amounts have been repeatedly requested by a local elector under s26 of the Local Audit & Accountability Act during the statutory inspection period of Cambridgeshire County Council’s own draft financial statements.  Each year the request has been denied.  

Since 2017/18, This Land’s accounts have been consolidated with the County Council’s own accounts, to form group accounts.  The group accounts form part of the local auditor’s audit.  Since 2018/19 the authority’s local auditor has been EY.  It follows that the audit extends to This Land Ltd’s own accounting records, and therefore that all This Land’s “books, deeds, contracts, bills, vouchers, receipts and other documents relating to those records”, as well as the accounting records themselves also come within the scope of statutory inspections of the County Council’s draft accounts. 

Perhaps Cllr Goldsack could lead by example in the interests of transparency and the public interest, and insist that Cambridgeshire CC stop denying the public their statutory inspection rights, and instead provide the missing details requested last August, including copies of the supplier invoices or other documents that make up the £1.46m worth of omitted administrative expenses in the notes to This Land’s 2022/23 accounts.  

Unless and until that information is provided, the public has no idea whether the undisclosed expenses were consultancy fees, backhanders, or any other inappropriate payments.  This Land and its auditors’ (RSM UK Audit LLP) refusal to comply with FRC 102, EY’s failure to demonstrate professional scepticism and to investigate or even comment, and the authority’s stubborn refusal to comply with its statutory obligations to the public together create what lawyers call “a plausible suspicion of wrongdoing" in respect of those undisclosed administrative expenses.

Sleepwalking to disaster. How This Land Ltd is failing

 By Andrew Rowson – January 2024 

‘In Local Government there is no substitute for doing boring really well. Only when you have a solid foundation can you innovate.’

Max Caller, CBE

 

 ‘If you look at Northamptonshire through to Woking, with others in between, what was happening there was a situation crystallising around a financial risk based largely upon commercial ventures.  That’s reflected a position whereby those organisations were not identifying and not addressing those risks.’

Michael Hudson, Cambridgeshire County Council S151 Officer

 

Certainly, if one looks back, it is absolutely the case that each of the local authorities that have had to issue section 114 notices has had failures of leadership, management and governance, and some have taken risks that were unmerited….So far….there has been a direct linkage between poor leadership and the subsequent issuance of a section 114 notice.

Rt Hon Michael Gove MP, Secretary of State, DLUHC

 

1 - Introduction

This report mostly comprises extracts from official minutes or transcripts from council committee meetings, or from reports by Cambridgeshire County Council (CCC) or its outgoing external auditor – EY.  It demonstrates firstly the recklessness of council officers and elected Members of CCC’s former Commercial and Investment Committee for launching a high-cost, high-risk commercial venture in 2016 with no detailed business plan, no public consultation, and on the basis of a fundamentally flawed prospectus.  The Council and its Members appeared to be oblivious to the reality that under the original flimsy “outline business case” even under the “extremely buoyant economic conditions for housing development” that existed seven years ago, the housing company was not expected to turn a profit “for years, if not decades”.  That being the case, the only two ways This Land Ltd could service its substantial interest-only loans to CCC were:

a)       By CCC borrowing yet more from the Public Works Loan Board (PWLB) and lending it on to This Land at commercial rates, thus creating a spiralling liability that could never be repaid, or, once central government put an end to that option...  

b)      By selling land purchased from CCC (with borrowed money) on to developers, and using that income to service the debt to CCC.  In so doing, This Land has cannibalised itself, whilst at the same time steadily eroding its potential for making future profits from selling its own houses – the very opposite of what the company was set up to do.

The longer This Land remains a loss-making enterprise, the heavier the debt burden becomes, the more land the company has to sell, and the less likely any prospect of ever making a profit or of repaying the debt.  In the accounting period to March 2023, 78% of This Land’s total revenue has come from Land sales rather than residential property sales.  It would appear, given the scale of the outstanding debt (£113.8m), the sale of £53.4m worth of land to date, and the surprisingly low sale prices of the units sold in 2022/23 (£247,000/unit on average), that This Land may already be past the point of no return.

The second revelation in this report is EY’s dishonesty in its statements about the prospects of CCC recovering the long-term debt owed by its wholly owned subsidiary.  In September 2022 EY acknowledged for the first time the “new and significant risk” of CCC not recovering some or all of its long term debt (113.8m) from This Land Ltd.  That risk was not new.  It was brought to EY’s attention in September 2021 by a local elector in an objection to the previous year’s accounts (2020/21), when CCC’s long-term debt from This Land had risen by £26 million to £113.8m.  EY ignored that objection (as it had ignored the two prior to that and the one after it), until presented with a Letter Before Action in October 2022.  Within days of that letter, EY accepted all four objections relating to four successive years’ accounts. 

In the September 2022 Audit & Accounts meeting, EY’s audit partner, Mr Mark Hodgson, told Committee Members that EY was discussing with management the possible need for “impairments” to the debt owed by This Land because of recoverability issues.  Yet six months later, (3^rd March 2023) in his decision notice to all four objections, the same audit partner declined to issue a public interest report about the significant risk of default because he had “not to date identified a level of indebtedness by This Land that would affect our value for money conclusion”.  Nine months after that, on 1^st December 2023, and after several missed self-imposed deadlines for completing its audit work on this matter, the auditor told CCC Members that the audit team has still not completed its audit work to establish how likely CCC is to recover all that substantial debt.  Those Members, like the public, may now have to wait until February to find out how safe local taxpayers’ money is.  That would be twenty-nine months after the matter was first brought to the external auditor’s attention, seventeen months after the auditor first flagged it up as a significant risk in his September 2022 audit plan, and seven months after EY and CCC had access to This Land’s 2023 Business Plan.  Last November's resignation of This Land’s Chief Executive (£235,038 annual remuneration including pension contributions) does not augur well for a positive outcome.

2 - Outline Business Case for CCC to establish a company as a Housing Development Vehicle (HDV) – 27^th May 2016

 

‘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. CCC is therefore developing, and delivering, a series of principally residential development projects from its property portfolio across Cambridgeshire, planned over an initial 10-year timescale.’

The nature of housing developments is that there is a significant time lag from the point at which sites are identified until the point that a revenue stream is created. One way of ensuring that revenue is received by CCC much earlier in this cycle is for CCC to establish a market loan to the HDV [Housing Development Vehicle]. The HDV needs to borrow at market rates in order to avoid state aid regulations but CCC can borrow at far more competitive rates from the Public Works Loan Board and take the margin on the loan in to CCC’s revenue account. CCC will therefore gain approximately 3.0 to 3.5% on everything it lends to the HDV from the point at which the loan is made, not when sales or rents start to be received by the HDV. This will mean that the HDV will be making substantial losses for many years. This is not of concern as this will be within the financial model and long-term business plan of the HDV.  See Agenda Item

3 - Minutes – Commercial & Investment Committee – 27^th May 2016

 ‘A Member spoke in favour of the direction proposed, given his experience as a member of another property board for a LA with considerable assets.  However, he felt that the risk already highlighted of government changing legislation, and ultimately the returns to the LA reducing, was a very real one which needed to be evaluated. He also pointed out that the simple business model presented gave the impression of “making money out of nothing”, which may appear to be the case for the Council’s revenue account, but it did have significant cashflow implications. He asked if enough was known about the Council’s future cashflow predictions, and sought reassurance that the Council would not go illiquid. Officers commented that this was a valid point, and the level of indebtedness would significantly increase, albeit to an acceptable level, as construction costs would require upfront funding, and this would be reflected on the Balance Sheet.

 A Member asked, on the basis of forecasts already undertaken on borrowing, repayments and income streams, how long it would be until there was net income. Officers advised that they did not expect the HDV [Housing Development Vehicle] to make a profit for some time, maybe even for decades, although the income for the Council would be realised straight away. Much depended on the shape and length of the development pipeline.

 A Member asked if the HDV would be open to legal challenges by other developers i.e. as a result of the Council selling land to its own company.  Officers advised that experience around the country to date showed that land had successfully been transferred in this way, and there had been no legal challenges to date. Members noted the potential issues where there could be challenge, around selling at less than best consideration. However, the model proposed would protect the Council from such challenges, as it was proposing to transfer land at market value to the HDV.

 A Member commented that future discussions and reports need to be clear whether they were referring to the County Council or the HDV. He also queried if making a return on money borrowed from the government in the way proposed was completely legal. Officers advised that it was, although it was noted that the government may introduce a cap on prudential borrowing in the future, at which stage the Council would need to look at other potential mechanisms.”  See Committee Meeting Minutes here.

Notwithstanding the above misgivings, Members voted unanimously for officers to incorporate the housing company, with no detailed business case, and without going to public consultation. Cambridge Housing and Investment Company Ltd (CHIC) was incorporated three weeks later.

4 - Minutes – Commercial & Investment Committee – 23rd February 2018

 A Member commented that the Committee was being asked to agree to the transfer of very substantial assets to a company when Members do not fully understand the reporting and governance arrangements: a workshop on these issues has been promised but had not happened. The Committee was unaware of the name change/ rebranding until the invitation to the relaunch event. The Member suggested that the decision be deferred pending the workshop being carried out. Another Member agreed, saying that this proposal was effectively being presented as a fait accompli, and she reiterated her concerns on the Risk Register and mitigation of the risks presented.

The Monitoring Officer and Deputy Chief Executive reassured Members that they took their roles very seriously, especially in ensuring the governance of the organisation was carried out in an appropriate way. Operational issues were the responsibility of the This Land Board: the Committee was not running the company. The Committee had appointed the Managing Director and shareholder representatives. Whilst the workshop on governance and reporting processes had not yet taken place, the Committee had had a workshop on the processes involved in the portfolio transfer, and there was no lack of transparency or openness on how that process was taking place.

In response to a Member question, it was confirmed that the Committee did not normally have the right to the commercially confidential minutes of the Board of Directors, but the Directors and Managing Director would be happy to talk to Members as shareholders.

A Member noted that whilst one of the recommendations was to declare the properties listed in the confidential Appendix 1 to the report as surplus, but there was no information provided on why those properties were surplus. In terms of process and audit trail, this information was required. Officers pointed out that the schedules and reports on these properties had been presented to the Committee over the course of the last 18 months. A Member highlighted that the Committee was in unchartered territory, and whilst This Land clearly had a clear business plan, there was nothing to compel them to realise their objectives, and the company had no mission statement, vision or values.

The Deputy Chief Executive commented that those issues had been set out in their Business Plan, specifically about how the company sought to differentiate itself. He stressed that the Council’s role as shareholder meant that they could not compel the company to deliver a certain percentage of affordable housing – if the Council did that, the dynamic would change, and the relationship would become contractual, which would have implications for the company’s ability to operate in a commercial environment.  See Committee Meeting Minutes here.

5 – Blog - Rt Hon Lucy Frazer KC, MP - 4^th April 2018

 

Lucy Frazer MP and senior representatives from Cambridgeshire County Council; Leader of the Council Cllr Steve Count, Chief Executive Gillian Beasley, and Deputy Chief Executive and CFO Chris Malyon, met with, Housing, Communities and Local Government Minister, Rishi Sunak MP to discuss the financial challenges that Cambridgeshire County Council face given their current funding…

Lucy said, “I am very grateful to Rishi for offering this meeting to Steve, Gillian, Chris and myself. Our meeting was extremely positive.  Rishi listened attentively to the concerns expressed and acknowledged the entrepreneurial spirit of Cambridgeshire County Council, praising their highly efficient operations….

The Minister acknowledged the Council’s highly efficient operations, praising the shared service agreements between Cambridgeshire and Peterborough, and identifying Cambridgeshire County Council as an example of good practice.  See Lucy Frazer's website here.

6 - Commercial & Investment Committee, 16^th October 2020

 Cllr Boden

‘..the Committee will have had the benefit of an email from Mr Rowson that was sent yesterday concerning various other councils and their attempts to raise money through commercial and investment processes.  And I think that that is an extremely helpful thing for all members to read – if you haven’t yet read it.  Because it shows just how things can go wrong if they are set up in the wrong way, and not properly monitored and any problems addressed, or if attempts are made to overreach.  And I think it's really important because this is something which officers and members in this Council have learned from.  We’ve learned from the mistakes in some other local councils – and there have been some… I’m not going to name any specific names, but there are some dreadful ones in addition to those that have already been highlighted by Mr Rowson in his email.  And we’ve learned from those lessons and we will make sure that we in Cambridgeshire don’t make some of the same mistakes that have been made elsewhere.

So far as this agenda item is concerned, I think that from our point of view in this committee, it’s important to bear more in mind than just the published figures of This Land Ltd.  We’ve set This Land Ltd up in order to be able to act in a commercial way – to be able to achieve certain objectives at arm’s length from the Council. We obviously have an interest in the financial performance of This Land Ltd.  But the interrelationship between the Council and This Land Ltd is of really vital importance.  And that isn’t really reflected in the figures of This Land Ltd, but relates to the fact that, first of all, we are receiving significant amounts of interest from This Land Ltd which assists us significantly in revenue terms.  And secondly we are effectively, in some respects, converting capital into revenue through what we do in This Land - which is also of benefit to the Council.  So when we’re looking at the effectiveness from this Council’s point of view of This Land Ltd, we don’t just look, as though we are an investor, at the figures that This Land produces.  We also have to think of how else we benefit as a Council.  And I don’t think that point always gets across very well, and it’s fairly clear from Mr Rowson’s question that it doesn’t get across to the public as well as it should do.

So I think that is something we all need to bear in mind.  And in connection with that, and looking at the recommendations that we’ve got in front of us today, I would ask – I’m not asking for the recommendations to be amended – but I would ask that what’s been delegated to the officers and the Chairman in terms of the detailed terms of the loan – that we ensure that the terms which are granted to This Land Ltd are no better that they would be able to get from the commercial market.  Because we’re not here to do benefit to This Land Ltd.  We’re here for the benefit of the Council.  And in order to achieve the best balance between what goes on within This Land Ltd and what we need in this Council, it’s important that we do follow the requirements of central government financing, to avoid state financing, but also to benefit this Council by ensuring that those terms are not at uncommercial and unrealistic rates.’  See YouTube video here. (Timestamp 1.03.56)

7 - Mark Hodgson, EY partner – CCC Audit & Accounts Committee meeting, 29^th September 2022

 For your attention primarily there are two new audit risks around the debtor associated with This Land, which links to working capital loans made to your wholly-owned subsidiary.

There has been some significant press coverage of both This Land and other housing-related subsidiaries in the country and their ability to repay the borrowing they have been afforded.  And in light of that we need to review the business model that This Land has via the component auditor, their going concern assumptions, and therefore their ability to repay the £113 million [£113.8m] that is currently outstanding at 31^st March [2022], and discuss with management the need for any impairment over that balance because of any recoverability issues. See YouTube video here. (Timestamp: 54.26)

 

8 - Mark Hodgson, EY Partner – Decision Notice on a local elector’s 2021 objection to the accounts – 3^rd March 2023

 Auditor’s decision and reasons: Local authorities have a general power to trade in function-related activities through a company (section 95 of the Local Government Act 2003 (LGA 2003)).  They also have a power to invest under section 12 of the LGA 2003.  The statutory guidance issued under 15(1) of the LGA 2003 gives further details around what investments are – financial investments include loans (paragraph 40).  Paragraph 33 states that local authorities can make loans to (inter alia) wholly owned companies.  Section 111 of the Local Government Act 1972 also provides a subsidiary power to local authorities to “do anything (whether or not involving the expenditure, borrowing or lending of money or the acquisition or disposal of any property or rights) which is calculated to facilitate, or is conducive or incidental to, the discharge of any of their functions”.  It is clear CCC has the power to pass money to This Land Ltd.  We are also not aware of any ground on which to base a conclusion of public law unlawfulness in respect of the exercise of such powers.  Therefore, there is no unlawful item of account.  We have not to date identified a level of indebtedness by This Land Ltd that would affect our value for money conclusion.  We have carefully reviewed these conclusions again, and we do not see an unlawful item of account or grounds to make a public interest report under the 2014 Act.  We are of the opinion that – from the governance and oversight arrangements in respect of This Land Ltd set out by CCC in its response (as well as the publicly available documents: particularly the Avison Young report and subsequent action and consideration of that report well into 2022) – there is appropriate governance, transparency and oversight of This Land Ltd.

 

9 - CCC - Audit & Accounts Committee meeting – 28^th September 2023

 Cllr Gay

Yes.  Just on This Land.  Can you give any sense on what sort of areas the projections (EY testing This Land’s cash flow projections in its 2022 Business Plan) cover, because I think the first capital repayment is in 2026, and obviously a default on those payments by This Land would be very serious indeed for the authority, and we need look no further than Thurrock to know that ill-conceived and failed capital projects have contributed to the failures in Slough and in Thurrock and a number of others.  So have we got any preliminary indications, and is there any sense in which we can plan to mitigate any impacts that failure to repay on time would have?

Tom Kelly, Service Director: Finance & Procurement

Yes.  So in terms of the audit of 21/22, I think EY have highlighted that as the recoverability of the long term debtor, or credit loss – so exactly the point Cllr Gay makes.  I think perhaps in simplified terms, the approach that’s been taken is to look at the assurance the Council has effectively received through the submitted This Land Business Plan, which for the relevant year shows a surplus of £16 million over the planning period in their central scenario.  And then looks at the assurances we’ve received and kind of test some of the underlying assumptions related to that.  So EY are for instance looking at checking [that] some of the actual values received back up the Business Plan.  They’re looking in detail at one of the construction sites that’s been completed, and again checking the income and expenditure figures match through there.  It relies on checking through how in particular inflation indices have been applied to the programme, and the future assumptions that have been made around strategic land sites that This Land still needs to acquire. 

So that gives you a sense of the detail and the type of responses that the Council’s needing to provide as part of that testing.  Of course, rolling forward to where we are now, there’s been a subsequent business plan received from This Land Ltd, and there’s been those national developments that Cllr Gay refers to.  And we have a number of assurance mechanisms continuing with the company and also in our kind of consideration of reserves provision and MRP.  There are kind of mitigations in place for some of the downside risk on those scenarios.  So it’s actively under consideration.

Cllr Wilson (Chair)

I’m not sure if you’ve got the bottom line.  Are we comfortable that we’re going to get the money back?  I heard a lot of “things are being studied in detail”.  But the bottom line is – are we confident we’re going to get the money back?

Service Director: Finance & Procurement

Yes.  So I think that the shareholder committee for This Land is the Strategy and Resources and er, was Strategy and Resources – now moves across to Assets and Procurement.  Relatively recently they got the most recent Business Plan report that does show the central scenario continuing to project full repayment of the loans on time.  The Council has officially received that, and we are comfortable with that position.  But it does show that there is risk with this venture, and there are sensitivities where that declines.  So that’s hence why we need to keep that kind of ever watchful vigilance in respect to it.

Chair

Thank you.  Any other comments?  Chris?

Cllr Boden

Not on This Land.

YouTube video here  - Timestamp: 50.26

 

10 - EY – Audit Results Report (ISA 260) - 21^st November 2023

Type of risk	Description	Findings and conclusion
Significant Risk	Recoverability of Long-Term Debtor with This Land Group	We have not yet fully completed our work in this area and will provide a verbal update on 1 December 2023. See Minutes here - Agenda Item 7.

 In the promised verbal update at the 1^st December 2023 meeting of CCC’s Audit & Accounts Committee, EY reported that its audit team was still working on this item, which remains the only outstanding material risk issue before the auditor can issue his 2021/22 audit opinion (Timestamp 1.20.50). The statutory deadline for 2021/22 audit completions was 30^th November 2022.

According to EY, the audit team is now looking at This Land’s future cashflow projections from its 2023 business plan.  EY and CCC have had access to the business plan since July.

That cashflow projection, (based on the assumption of zero inflation – see below) shows cash balances fluctuating between £10m and £20m for the next three years, before shooting up in the second half of 2026 and 2027, just in time to repay the loan principal in three tranches:

·         January 2028 - £64.7m

·         September 2028 – circa £39.2m

·         January 2029 – circa £9.9m.

This Land’s eventual success in repaying the loans therefore depends entirely on an unlikely surge of substantial profits in the last two years before March 2029, in the teeth of economic headwinds of falling house prices, falling land prices, and with an onerous debt burden.  Given This Land’s track record for getting its projections wrong, the above cashflow forecast does not inspire confidence.  CCC, This Land Ltd and their respective external auditors both assess This Land’s going concern status by looking only at the next twelve month horizon.l

11 - This Land’s 2023 Business Plan – Alice in Wonderland

The “outline business case” that CCC Members approved unanimously in May 2016 made no mention of the number of houses the HDV planned to build.  A year later, CCC’s 2017/18 financial statements contained the following:

Five years later, This Land’s 2023 business plan (see below) sets out the more modest ambition of building and selling only 490 houses itself by January or March 2029, with a further 453 to be built by other developers, making up 863 in total.  Given the 53 units This Land has sold in the seven years to March 2023, that presumably means that in order to meet its target of repaying the £113.8m loan principal by 2029, This Land itself anticipates selling a further 437 homes (490-53) in the six years to 2029.  That equates to an average of 73 annual house sales until then.  Most of those will need to be built without This Land being able to borrow further from CCC.  These figures and assumptions are all based on the limited information available to the public.

This Land’s original outline business case and subsequent business plans all proved unrealistic.  Delays in securing planning permission and other setbacks meant that the company did not sell its first house until its fifth year of operation.  Without considering where the cash would come from to pay its growing loan interest obligations, and with central government putting a stop to councils borrowing from the Public Works Loan Board for commercial gain, in the last three accounting periods This Land was obliged to sell some of the land it had purchased from CCC just to keep the company afloat.  As at March 2023, only 22% of This Land’s total revenue had come from selling houses.  The remaining 78% came from land sales.  The £53.2m figure for land sales in the graph below excludes a further £27 million CCC claims This Land will receive from land sales between 2023 and 2026 in a “binding contract” (p 36). Additional plot sales are expected during 2023/24.  That would mean This Land receiving at least £80m of revenue from selling land it had originally bought to build houses on.  It is precisely what council officers assured Members in May 2016 it would not do:

“Simply selling sites for others to develop, and profit from, is no longer an option for CCC.”

The public has no information about any profit share arrangements between This Land and the developers who have purchased the £80m worth of land.

As noted in a previous article, the headlong dash for cash has also meant that the average sale price of homes sold by This Land in the last three accounting periods (as per This Land’s audited accounts) has fallen from £550,000 per unit in 2020/21, to £329,000 in 2021/22, and to £247,000 in 2022/23.

This Land’s 2023 business plan projects future net profits totalling £42.5 million from 2023/24 onwards:

When placed alongside the company’s audited historical losses up to and including 2022/23, the figures look like this:

On 17^th November 2023, 23 days after the company’s latest audited were published on Companies House, This Land Ltd’s Chief Executive resigned.  Those accounts recorded a comprehensive loss of £11.2m for the year to March 2023 - £2m higher than the £9.2m shown in the 2023 business plan published in July (see table above).

If the past history of 53 house sales producing net losses of £38.35m is compared with the future promise of £42.5m net profits and 437 additional houses sold by the beginning of 2029 (see above), the two sets of data produce starkly different net profit/loss per unit statistics:

  

None of the information available to the public can explain the alchemy the company now promises will turn its fortunes around only in three years’ time, or why that secret of success has eluded This Land Ltd for so many years.

The derived net profit figure of £97k per house sale above is after charging around £4m/year of administration expenses, and after the loan interest expense (currently over £8m/year).  When those two are added in, the figures suggest This Land’s gross profit on each house sold in the remaining years to March 2029 will need to be at least £260,000 on average, which is higher than This Land’s average house sale price in 2022/23.  In other words, in the absence of additional critical information not provided to the public, the figures presented in This Land’s latest business plan do not begin to add up, and it should not have taken EY over six months to draw clear conclusions from its audit work – especially when it was first informed of the debt recoverability issue well over two years ago, when the debt first rose to £113.8m. 

For years, CCC has denied the public more granular information about This Land on the grounds of “commercial confidentiality”.  In July 2023, a confidential appendix to This Land’s latest business plan was provided only to Members of the Strategy and Resources Committee behind closed doors.  One concern is that to avoid embarrassment, CCC might be allowing This Land to limp on until it finally crashes, generating further substantial losses along the way that local taxpayers will ultimately have to pay for, rather than putting the public interest first and making a sober assessment of its subsidiary’s future prospects.

As a result of This Land’s substantial losses to date, the succession of failed business plans, the auditor’s recent concerns about the recoverability of loans made to the company, vague talk of using reserves to deal with the “downside risk” of the loans not being repaid, and the suspicious shape of the latest cash flow projection – with cash reserves only beginning to accumulate at least three years hence, the public can have little confidence in the latest plan without seeing more concrete and credible information.  CCC should therefore stop hiding behind the “corporate veil” and the convenient excuse of “commercial confidentiality”, especially since This Land has evidently not been treated on a commercial, arm’s length basis in several respects.  To assure local taxpayers (the ultimate stakeholders) that This Land’s latest business plan is not another illusion or a delay tactic to prolong the company’s end artificially, the County Council should provide additional substantial information to support the latest cash flow forecast.  That information should be in the form of numbers of projected house sales per year up to 2029, with some credible indication of profitability per unit sold.  It should also explain why This Land has used the “base case forecast” for its projections, predicated on a zero percent inflation rate, when inflation rates, especially in construction, are historically extremely high, and predicted to remain high for several years to come.  Credible granular information from the authority is essential since on many occasions in the past EY has shown itself not to be an independent party, as its contradictory statements on This Land also bear witness (see sections 7 and 8 above).  In the absence of any supporting evidence, a simple vote of confidence by EY on the recoverability of the £113.8m debt is unlikely to quell the public’s unease about This Land’s future.