Where will This Land Ltd's business plan cash come from?

 By Andrew Rowson

At the July meeting of Cambridgeshire County Council’s Shareholder Sub-Committee, the latest, long-awaited business plan of the authority’s wholly-owned housing development company This Land Ltd (TLL) was revealed and approved by members.  An earlier business plan shown to councillors in January in private session was rejected.

Not all the latest plan has been revealed to the public however.  The latest business plan available to the public does not show key details such as the number of projected house sales year by year, sales revenue or the annual costs of building those houses.  Instead it just shows annual cashflows. 

The table below is the simplified cashflow model available to the public.

The bottom two sections are easy enough to understand, but the site cashflows section at the top is lacking in detail, and problematic.  Over time, operating cashflows approximate to gross profit (sales less cost of sales).  The site cashflows therefore indicate that over the six financial years to March 2030, TLL aims to make gross profits of around £88 million that will be used to pay off the 59.9m loan balance as at March 2025, though not the £59.95m that was effectively written off in March this year (see the “Conversion to Capital” reference above).  Without that write-off, TLL's outstanding debt at 31 March 2025 would have been £119.75m

In the real world, those annual site cashflows do not occur simultaneously. The expenditure involved in buying building materials and paying for the outsourced labour to build the houses must precede the cash revenues from selling the houses - often by many months.  This Land’s historical record over the last five years shows it has achieved a total gross margin of just below zero per cent.

Given that track record, it would be unrealistic to expect TLL, in its tenth year of trading suddenly to leap to a healthy gross profit margin of 30% say, especially when it has pledged to build and sell 45% of  houses as affordable homes, which have lower margins.  In light of TLL’s minus 23% gross margin in 2024/25, it is a stretch to suggest even a 10% gross margin going forward, and no evidence is available to the public to suggest it is capabe of achieving even that. 

Nevertheless, with a gross profit margin of 10% in 2025/26 (year 2 from the business plan table at the top), in order to achieve positive site cashflows of £12.6m, This Land would need to spend around ten times that sum (£126m) some time before it could collect the sales proceeds of eleven times that sum (£138.6m) - resulting in the 10% gross margin of £12.6m.  Where will it find that cash?  According to figures from This Land's consolidation accounts schedule, It had £10.9m in the bank in March 2025, and inventory with a book value of £46.7m. 

Even if it depleted all of that in 2025/26, it would still be £68.4m short of the cash it would need to achieve those 2025/26 sales.  It cannot deplete all the cash and inventory anyway because it needs to replenish both for future years.  As with all of This Land’s previous business plans, the arithmetic just does not add up.  If its gross profit margin in 2025/26 were lower, at just 5%, it would need £252m of cash to make £264.6m worth of sales to produce the same projected £12.6m positive cashflows – an even more far-fetched scenario, and impossible without significant additional funding from Cambridgeshire taxpayers.  TLL claims it will require no more funding from the council until 2030.  It has made the same claim several times before.

Moving to year 4 in Table 2 above (FY28), at a 10% gross profit margin TLL would need cash resources of £454m to achieve site cashflows of £45.4m, or £908.6m cash up front to achieve the same site cashflows with a 5% gross profit margin.  Again, where will that money come from? 

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? 

£230,000/year - Value for money for a council Chief Executive?

By Andrew Rowson

Local newspapers recently published details of the 30 council bosses in Cambridgeshire with salaries over £100,000.  The information, taken from councils' 2023-24 accounts, was published by the Taxpayers' Alliance.  By law, councils have to agree senior salaries for the upcoming financial year in the annual Pay Policy Statement, so the most recent figures available are for 2025-26, the financial year that began at the beginning of this month.

Cambridgeshire's highest paid council boss is Dr Stephen Moir, the County Council Chief Executive Officer.  His salary for 2025-26, approved by the full council on 18th March 2025 is £200,593.  With Employer's National Insurance contributions of £29,339 on top, the total cost to the taxpayer for Dr Moir's services this year is £229,932.  The council does not make any pension contributions to the CEO's pension.

CEOs, like all holders of public office, are required to abide by the law and the Seven Principles of Public Life, known as the Nolan Principles.  These are:

• Selflessness (acting solely in the public interest)
• Integrity (avoiding conflicts of interest)
• Objectivity (no discrimination or bias)
• Accountability to the public for their decisions and actions
• Openness (i.e. not withholding information from the public without clear and lawful reasons)
• Honesty
• Leadership (treating others with respect, supporting the principles and challenging poor behaviour wherever it occurs).

Here are some of Dr Moir's actions and decisions in the last twelve months in relation to the council's wholly-owned, lossmaking housing development Company, This Land Ltd.

• During the 2024 accounts inspection period last summer, Dr Moir supported his finance officers' decision to deny local electors their statutory rights to inspect and have copies of This Land Ltd's 2023-24 draft accounts and key invoice and contract documents, in particular in relation to its administrative expenses (£4,087,624), land purchases and sales - including the sale of £24,897,620 worth of mortgaged land (without repaying the mortgage principal).  This Land's accounts form part of the county council's consolidated group accounts, which are subject to audit by the county council's local auditor.  Therefore, This Land's draft accounts and related documents etc. all fall within scope of s26 of the Audit & Accountability Act 2014, and are subject to inspection by interested parties.
• In July 2024, Dr Moir must have approved, and is ultimately responsible for the recommendation of his Executive Director of Finance and Resources, Mr Michael Hudson, to provide This Land Ltd with a further £6.3 million loan, in spite of the company's record losses and inability to repay at least £7.4 million worth of loan interest during 2024/25 on its existing £113.8 million worth of loans from its sole shareholder.  He must have approved of Mr Hudson's recommendation to take £2 million from the authority's reserves to subsidise the £2.374 million in loan interest payments the council owes to the Public Works Loan Board (PWLB) in 2024-25 for borrowing the £113.8 million subsequently lent on to This Land Ltd.
• Dr Moir must have approved Mr Hudson's recommendation to allow This Land to defer all loan interest payments to the council for the foreseeable future.  Apparently that decision was made at the same time, or even before the recommendation to lend This Land a further £6.3 million.
• Dr Moir must have approved of his Monitoring Officer (Emma Duncan) declining to explain to a local elector how, in her opinion, that commercial loan, funded from "prudential borrowing", did not contravene the government's 2020 ban on councils borrowing from the Public Works Loan Board (PWLB) for the principal purpose of obtaining a commercial yield for the council (i.e. "commercial rate" loan interest receipts),
• Dr Moir must have approved of Mr Hudson's and Ms Duncan's decision to conceal This Land's 2025-26 ten-year business plan from the public.  That business plan, which county councillors have been discussing in closed session, supposedly explains how the company is to make at least £120 million worth of profits in the next four years to pay off all its loans by January 2029, after making £50 million worth of losses in its first eight years of trading.  In January this year, Cllr Ros Hathorn, Chair of the new Shareholder's Sub-Committee, told members that it was not in the public interest for the public to see the plan.  This Land's last two business plans, for 2022 and 2023 were both published and are in the public domain.  In each case, its cashflow projections proved completely unreliable.  The 2023 business plan for example promised that the company would require no further cash injections before 2029.  The 2025-26 business plan is already the subject of a Freedom of Information request that will result in a formal complaint to the Information Commissioner's Office if it is not made public by 14th April 2025.

Dr Moir, Mr Hudson and Ms Duncan are the county council's three statutory officers.  In 2025-26, including pension contributions for the latter two and employer's NI contributions for all three, these holders of public office will cost local taxpayers at least £620,000.

The corresponding information for This Land's senior executives is not available.  What is known from This Land's latest available audited accounts (2023-24), is that as the company made record losses of £11.9m for the year, its overall employee costs rose by 23% to £2,636,883 (p34), and Non-Executive Directors' fees rose by 13% to £226,333.  This Land Ltd's external audit fees for 2023-24 rose by £2,500 to £102,500.  This Land's 2023-24 employee costs included a £39,500 payment for loss of office to the company's former Chief Executive, Mr David Lewis, whose appointment was terminated in November 2023, three weeks after the 2022-23 accounts were published.  His successor, Mr David Meek, had his appointment terminated on 5th February 2025, four weeks after the 2023-24 accounts were published.  This Land's 2024-25 accounts, when published, may therefore include further loss of office payments. 

Being economical with the truth

 By Andrew Rowson

At the meeting of Cambridgeshire County Council (CCC) on 18th March 2025, councillors heard a public question from Soham resident, Mr Phil Duff, and responses from council leader Cllr Lucy Nethsingha.

The Youtube video of the exchange is found here.

The public questions and responses are transcribed below, followed by commentary on the highlighted sections in the text.

Mr Duff:

The figures I’m about to quote are taken from This Land’s own accounts, which they have filed at Companies House – thus making them public documents.

Cambs County Council’s wholly owned company – This Land, has lost money every year since its inception eight years ago, and has now lost over £50 million in total.  These losses have accelerated to nearly £1 million per month in the last year.  Bearing in mind the ever-growing gap between its liabilities of over £120 million, and its assets of just £76 million, how much longer is the council going to allow this company to continue?

Cllr Nethsingha:

Thank you for your question, Mr Duff.  Whilst it is typical for a company of the nature of This Land to experience accounting losses in the early years of development, the wider economic situation arising from the pandemic, the Ukraine war, alongside the impacts on inflation and interest have adversely impacted nearly every company in this sector.   It is helpful, I think, to point out that the original plan was always a long term one, that the company would deliver projects and a return by 2030 – and that remains the focus of the company.   The joint administration has transparently shared that it took a decision to support that delivery with a small additional cashflow  to enable the company to progress its developments in response to those challenging economic factors.

The company board has assured itself of the future solvency of the company as it must regularly do, and I thank them for that challenging task.   The county council officers are diligently collaborating with the company to ensure the successful delivery of projects, and we also have a robust and regular governance check on it, including the newly appointed shareholder sub-committee, which continually checks and assures the performance and [that] the business plan is achieved. 

We remain focused on ensuring that the overall long-term cashflow to the council from This Land is greater than its outflows,  and while also realising the huge tangible benefits to our community that have been secured from the development of land and homes in Cambridgeshire. 

Mr Duff – supplementary question:

The Council’s own auditors, KPMG advised the following on This Land:

“The Council does not have the suitable skills and experience to effectively manage the risks associated with the commercial private sector subsidiary facing significant financial cashflow challenges.” 

 On the evidence to date, they are stating the obvious.  Or do you think your own auditors are wrong?

Cllr Nethsingha:

I think it’s always important that any public organisation takes the view of its auditors seriously – and we do take the view of our auditors seriously, and we have been reviewing the governance arrangements around This Land.  Thank you.

Commentary

This Land Ltd has now lost over £50 million in total

The company that was later renamed This Land Ltd (TLL) was incorporated in June 2016, under the previous Conservative administration.  When the Lib Dem/Labour joint administration took over in May 2021, This Land's cumulative losses were £16.5 million.  Today they are 50.23 million.  The company's audited accounts are filed at Companies House.

In the original plan, the company would deliver projects and a return by 2030

The public has not seen the original plan, only the original "outline business case" presented to members of CCC's former Commercial & Investment Committee on 27th May 2018, which promised that the company would make "substantial losses for many years"... "maybe even for decades".  This Land's 2022 and 2023 business plans do not mention making any return.  The 2023 business plan states:  

"The business maintains a good cash position up until 2029."

and 

"Our cashflow modelling confirms the repayment of all loans and interest by 2029."

Both predictions have been proved wrong, since the company requested and was given another loan of £6.3m by CCC just twelve months later, to address TLL's cashflow situation.  CCC is now restructuring its loans and allowing the company to defer loan interest payments for the foreseeable future.  So even the latest loan was not sufficient to put things right.

For This Land to repay its loans and make a return by 2030, or even break even, it would need to make at least £180m of profits in the next five years to cover the loan principal repayments, loan interest backlogs, and to make up for the £50m worth of losses recorded to date.  Since the company only had £25.4m of land security left at March 2024, and in light of its commercial record to date, that outcome appears most unlikely.  If it makes further losses in 2024/25 - which seems more than likely, then the challenge will become harder still.

"The joint administration took a decision to support that delivery with a small additional cashflow"

The "small additional cashflow" took the form of a £6.3m short-term loan agreed in closed session by CCC's Strategy, Resources and Performance Committee in July 2024.  It would appear to be an unlawful loan, since its primary purpose was to secure a commercial yield for the County Council on the interest rate difference between CCC borrowing from the Public Works Loan Board at around 2%, and lending to This Land at a "commercial" 7.1%.  Such borrowing for commercial yield was banned by the last government in 2020, backed up by revisions to the Prudential Code in December 2021.

According to the Asphalt Industry Alliance, £6.3 million in 2025 would pay for the repair of 87,000 potholes at the UK average cost of £72.37 per pothole.

But there have been other irregular cashflows to This Land Ltd, to the tune of around £55 million over the last four years that have gone under the radar, and have impoverished CCC whilst robbing local taxpayers of the same amount of land security.  

Under the peculiar terms of the charge documents drawn up between CCC and This Land, such as the Queen Street, March charge (see also below), This Land was granted ownership of the properties from day one - see Background, paragraph (B) - even though the property purchase by the borrower was

"deemed to constitute a legal mortgage over the property" - see Background, paragraph (D)

In addition, under the same charge/legal mortgage template, which seems to have been used for all such charges, the borrower is permitted to dispose of the property to a third party, with the sole condition being the lender's 

"prior, reasonable, written consent." (- see paragraph 7.1)

In other words, This Land has been allowed to sell its mortgaged properties and transfer the title deeds to third parties without first having to repay the loan principal to CCC.  These documents thus represent a novel interpretation of what is normally understood as a legal mortgage over a property, that will be wholly unfamiliar to any householder with a mortgage of their own.  At face value these agreements would appear not to protect the lender's interests, and therefore they give rise to the question of whether the solicitors who drafted the documents were acting in the best interests of their client (CCC).

This Land has taken full advantage of the apparent loophole in these charge documents to sell on £78 million worth of mortgaged property since 2020 (i.e. after the government's ban on borrowing for yield) without repaying any, or almost none of the loan principal.  In so doing, This Land effectively helped itself to at least another £55.1 million pounds of cash that should have been returned to CCC.  That is the only reasonable explanation for why CCC's land security over This Land's property fell from £80.5 million at December 2019 (see Inventory note, p30) to just £25.4 million at March 2024 (see Inventory note, p37) whilst, over the same period, This Land's long-term borrowings from CCC rose from £88 million to £113.8 million, and remained at that higher level for the last four accounting periods. 

To readers of CCC's own audited accounts - until 2023/24 at least, this steady erosion of CCC's security over its loans to This Land, and the fact of the company failing to repay CCC material sums of loan principal when it disposed of those properties, has gone unreported.  This is what CCC's accounts have said about land security in recent years:

"The Council’s credit risk exposure to its customers and entities that it loans funds to (such as This Land Limited) 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.

During the reporting year the Council held no collateral as security, other than for loans to This Land Group."

Readers of CCC's accounts and group accounts who have not scrutinised This Land's own accounts (why should they have to?), have thus been given the wholly misleading impression that all, or substantially all CCC's secured loans to This Land remain secured against mortgaged properties - because that is the public's understanding of how legal mortgages work.   They will not be aware that around 80% of those loans are now unsecured because This Land has sold most of the land to third parties.

The initial batch of charge documents was drawn up by LGSS Law Ltd (now Pathfinder Legal Services Ltd) and dated 13th April 2018.  LGSS Law was 33% owned by each of CCC, Northamptonshire CC and Central Bedfordshire DC.  LGSS Law's CEO was Mr Quentin Baker.  Mr Baker was simultaneously the Monitoring Officer of Cambridgeshire County Council and Central Bedfordshire DC, as well as being one of This Land's two founding directors (along with CCC CFO Mr Chris Malyon).  Mr Baker and Mr Malyon were thus both effectively borrower and lender at the same time in respect of the loans CCC made to This Land Ltd.

Mr Baker unexpectedly and without notice resigned/was terminated as CEO of LGSS Law Ltd on 14th May 2018 (one month after the first charge date).  He left CCC on the same date, the day before a meeting of the full council.  Companies House shows his termination at the This Land group companies on 5th June 2018.  The public has never been given an explanation for his sudden departure other than his statement that he decided to seek new challenges elsewhere.

If the above legal mortgage document conditions have been respected by both parties, the other inescapable conclusion is that one or more senior finance officers at CCC over the last four years have given their "prior reasonable, written consent" to the This Land group of companies (This Land Development Ltd in particular) to dispose of those properties, effectively waving goodbye to £55.1 million of land security without receiving the corresponding loan principal in return.  They have also allowed This Land to spend that money so that, following last year's £6.3m loan, there is now an almost £100 million shortfall between what This Land owes CCC (loans plus equity), and the remaining land security CCC might be able to recover in the event of This Land defaulting on its loan repayments - a risk which CCC's auditor KPMG describes as "significant".  The auditor also noted that This Land was not included in CCC's corporate risk register for 2023/24.  Councillors serving on the Strategy, Resources and Performance Committee, or on the Shareholder Sub-Committee might wish to request copies of those consent documents, and share with local taxpayers whose signatures they bear.

"The company board has assured itself of the future solvency of the company as it must regularly do."

This Land's directors prepared the company's 2023/24 accounts on the going concern basis, largely because CCC guaranteed to support the company financially for at least the next twelve months, as it has done every year.  CCC made that guarantee because, up until the end of 2023/24 at least, it relied on the net loan interest income from TLL to balance its own revenue budget, even when the income was initially sourced from more loans from CCC, and later on from the sale proceeds of TLL selling its own mortgaged land to third parties.  This Land's auditor (RSM Audit UK LLP) relied on the board's going concern conclusion.  This Land had a cash balance of £6.1 million at the 31st  March 2024 balance sheet date.  Had it repaid CCC the £55 million or more mortgage balances when it sold those mortgaged properties over the last four years, This Land would not be solvent today.  On the evidence of the company board's previous assurances, the public cannot be blamed for having little confidence in their statements about the future.  Nor should the council.  Why should This Land be entrusted with any more of our money?

"...realising the huge tangible benefits to our community that have been secured from the development of land and homes in Cambridgeshire."

This Land's audited accounts show that in the eight years to March 2024 it sold just 76 houses, and that 76% of its revenue came from selling its own mortgaged land, often at a loss, rather than from selling houses it has built.  For example, in April 2018, This Land purchased land and buildings from CCC at Queen Street, March for £840,000, with a 100% mortgage from  its shareholder.  This Land did not develop the property, but paid loan interest on it for four years and five months before selling it in September 2022 for just £392,000 including VAT.   It follows that most of the benefits to the community in terms of providing new homes could have been achieved more cheaply and simply, and without any commercial risk, if the County Council had sold its land directly to developers, as it did before This Land was incorporated.  Going indirectly through a company that has shown itself incapable of building and selling homes for a profit, that has annual overheads of over £4 million, is hamstrung by £8.5 million annual finance costs and debts of over £120 million that realistically, it will never be able to repay, was and remains an entirely avoidable risk.

"We do take the view of our auditors seriously"

Here are two further comments by KPMG on the Significant Value for Money Risk relating to private sector skills and experience, taken from its Annual Report for CCC: 

"Given current economic uncertainties affecting the construction sector, the continued under-performance of This Land and the various complex options being considered to maximise the Council’s return, we consider it would be appropriate for the Council to have representation on the This Land Board and Strategy, Resources and Performance Committee with appropriate skills and experience."

"Based on our findings we have determined that there is a significant weakness in relation to arrangements for economy, efficiency and effectiveness due to the lack of expertise required to oversee and challenge commercial subsidiaries, particularly This Land." 

At three meetings since 29th January this year, the Strategy, Resources and Performance Committee chaired by Cllr Lucy Nethsingha, and the Shareholder Sub-Committee chaired by Cllr Ros Hathorn met in closed session to discuss This Land's 2025/26 Business Plan and other matters relating to the company's future.  From what the public can glean, all the talk has been about continuing financial support, restructuring loans and deferring loan interest repayments.  Nobody at CCC seems to be entertaining the thought of winding the company up before the losses rise even further.  Would a rational commercial lender think along those lines looking at This Land's performance over the last nearly nine years? 

It would appear that CCC is already ignoring its auditor's advice by allowing unqualified people to make far-reaching decisions behind closed doors on the future of This Land Ltd that may have considerable financial repercussions for local taxpayers.  Is it too much to ask the council at least to put off making major decisions about This Land until those charged with governance and scrutiny have received the recommended training, and until there are expert people in the room who know what they are doing? 

KPMG's damning report on Cambridgeshire County Council's wholly-owned housing development company - This Land Ltd

 By Andrew Rowson

At the end of February 2025, Cambridgeshire County Council's independent auditor, KPMG, published its Year-End report for 2023/24.  More formally it is known as the statutory ISA260 report to those in charge of governance.  At CCC it is presented to elected members serving on the Audit & Accounts Committee.  The extract below is taken verbatim from p31 of the report.  It concerns the strain of This Land Ltd's commercial and financial performance on the Council's financial sustainability.

Specific Financial Pressures

As noted on below, the Council have several significant financial pressures which together have the risk of putting long term strain on the financial sustainability of the Council. KPMG have performed a review of each of these areas to understand their cumulative financial impact on the Council.

This Land Limited.

This Land Ltd is a development company wholly owned by Cambridgeshire County Council established in 2016. The Council has loaned £113.85m to the Company and also invested £5.85m as equity. We are aware that post year end additional funding has been provided to This Land in 2024-25 of circa £6m. We have reviewed the actual performance over time below and note that whilst revenues have seen a steady increase there has been a steady decline in net liabilities over this period making the ability for the company to repay the loans to the Council more challenging. In addition, the company continues to generate gross losses of 25% to 56 %

This Land is not currently performing in line with its initial business plan, with significant increases in the net liabilities position noted between January 2022 to January 2024, and there remains financial challenge into the future. We are aware that the Council is currently reviewing a new business plan for This Land in February 2025 and will be considering if there are any indicators of an effective credit loss provision to be recognised. We note no such provision was calculated in 2023-24, and due to the backstop, we have been unable to provide any assurance over the recoverability of the This Land debtor within the Councils accounts as at 31 March 2024.

Whilst any expected credit loss charge in 2023-24 or 2024-25 would not pass to the general fund due to the reversal through the Capital Adjustment Account (CAA), we note that the borrowing to This Land has not been included as part of the Minimum Revenue Provision (MRP) under the current Council Policy. We are aware that changes to the requirements of the MRP provision effective from 1 April 2025 will mean that such a charge will be required to be included going forward, and any in-year credit loss would also be required to go through the MRP in the year incurred. This would directly impact the Council’s revenue budget, potentially limiting funds available for other services. We note that management has included a provision in the MRP for This Land, however, there remains the risk that the future credit loss could be greater.

Therefore, whilst the immediate impact of any credit loss provision does not have direct consequences in the 2023-24 period, there is future risk to Financial Sustainability as a result of the risk that the Council may not recover all funds lent, or generate the expected return, and due to the associated MRP implications. The Council is still in the process of being able to clearly understand and quantify the risk to non-recoverability of the debtor/ investment.

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

Not in the public interest - Cambridgeshire County Council hides key Business Plan from the public

By Andrew Rowson

For the five years financial years to 2022/23, Cambridgeshire County Council's previous external auditor, Ernst & Young (EY) failed to highlight the unfolding disaster of its client's 100% owned housing subsidiary This Land Ltd - its ever rising losses, or the potential damage the subsidiary could have on the council's own finances.  That is not surprising.  According to a 2024 report by Sheffield-based consultancy The Audit Reform Lab, in the private sector, EY warned of going concern risks for just 20% of its clients that collapsed within the following twelve months.  

A perfect circle of self-delusion

At CCC, EY consistently relied on This Land's own auditor (RSM Audit UK LLP) for its assessment of This Land's going concern.  RSM relied on This Land directors' assurances, which were in turn based entirely on CCC's finance officers who promised, and still promise, unstinting financial support to its subsidiary, however poorly it performs.  CCC finance officers though cannot be described as entirely objective in their assessment, because ever since the authority began lending far more money than it should have done to This Land, its own revenue budget has depended absolutely on receiving up to around £8.5m of loan repayment interest from This Land each year to balance its books.  Should that revenue dry up, the council would need to make adjustments elsewhere, either by finding proper savings in other directorates, or by making cuts to frontline services.   CCC's elected members serving on the four committees most closely charged with governance of This Land have nonetheless been happy to receive EY's positive assurances about This Land's going concern status without a second thought. 

Those committees are:

• Strategy, Resources and Performance Committee, chaired by leader Cllr Lucy Nethsingha,
• Audit & Accounts Committee, chaired by Cllr Graham Wilson,
• Assets & Procurement Committee, chaired by Cllr Ros Hathorn, and 
• Shareholder's Sub-Committee, also chaired by Cllr Ros Hathorn

Some councils are accused (usually after they have failed), of showing a lack of curiosity or challenge in what they are told by officers.  CCC's culture takes that deference to new heights, as illustrated here by Cllr Nethsingha at last December's full council meeting when a member of the public asked whether the management at This Land Ltd still enjoyed her full confidence.  

"I have absolute confidence in the officers and the people involved in council in the management of This Land and our relationship with them."

Last month, shortly after This Land's final accounts were published on Companies House, its Chair and CEO were dismissed, with further replacements on the board promised in the coming weeks. 

Now that This Land has completely run out of cash and cannot pay CCC the loan interest (£7.414m shortfall forecast for 2024/25), the process of looking elsewhere for savings/cuts has begun in earnest. A finance monitoring report prepared for the 11th March meeting of the Strategy, Resources and Performance Committee puts it this way: 

"Through business planning, the council has already taken steps to reduce its future income expected from the company [This Land Ltd] resulting from reduced interest."

This Land's latest business plan is therefore of great public interest.  CCC revealed in this month's finance monitoring reports that This Land's revised annual business plan (the first since 2023) included 

"a deferral of interest payments to the council"

and that further support from the authority would still be necessary.  That does not look like the normal relationship a council should have with a true arm's length company.

In its year-end report for 2023/24 prepared for last month's Audit & Accounts Committee meeting, auditor KPMG was more realistic than EY in the past about This Land's financial position:

"Following review of This Land’s financial position and performance against business plan we have reassessed the risk of material misstatement to be significant.

..... 

Management have not provided us with a paper or workings for an assessment of Expected Credit Loss (ECL) provision for the This Land Debtor, nor has any provision currently been recognised. The ECL provision should be equal to the contractual cashflows less the amount of cash (or similar consideration) expected to be received by the Council. We note that this balance, and the resulting accounting treatment, is highly dependent on This Land’s ability to deliver its future business plan."

Historically, This Land's business plans have all proved to be wildly inaccurate, both in projecting profits and in their cashflow forecasts.  The latest business plan, which the Shareholder Sub-Committee discussed in closed session in its January and February meetings, has much riding on it.  Every year since CCC began lending money to This Land, both parties have assured the public that all the loans will be repaid in full by the final repayment date, which according to the schedule of payments on page 19 of This Land Finance Ltd's latest audited accounts is January 2029.  With practically no interest payments from This Land to CCC anticipated in 2024/25, it looks highly likely that This Land will record losses again in its ninth successive set of financial statements.  If so, it will need to make £120 million worth of profits in just three years (£40m/year) if it is to pay back the loans on time, or else restructure the debt over a much longer period, which in one sense increases the level of risk for Cambridgeshire taxpayers.  Whatever is in This Land's latest business plan, it is wrong that elected members should be allowed to conceal it from the public, especially since the last two business plans, for 2022 and 2023 were published on CCC's website with minimal redactions.

In its End of Year report accompanying CCC's final 2023/24 statements of accounts, KPMG expressed no confidence in the skillsets or experience of CCC's officers or members to manage the risks of a housing company in This Land's precarious position (see End of Year report, p49).  That means the public can have no faith in their abilities either.  It is a case of the blind leading the blind.  If elected councillors miscalculate again now, local taxpayers will ultimately have to pay the price.  But if the public cannot see the document councillors are working on, how can our representatives be held accountable for the decisions they make on our behalf?

The Public Interest Test

It was disappointing therefore to see Cllr Ros Hathorn assert in February's Shareholder Sub-Committee meeting that This Land's revised business plan was exempt from disclosure, and that...

"it would not be in the public interest for this information to be disclosed".

Cllr Hathorn knows that even if information presented at a council meeting is deemed to be exempt from disclosure under Schedule 12a of the Local Government Act 1972, the law still requires committee members to undertake a separate, thorough public interest test in which they have to consider and vote on whether, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.  The default setting should be to disclose the information.  Cllr Hathorn has seen the helpful guidance published by Herefordshire County Council about Schedule 12a of the Local Government Act 1972 and the public interest test, but clearly she thinks it does not apply to the committees she chairs, very much like the council leader herself.  At Cambridgeshire County Council, councillors believe they can routinely breach the law and deny the public access to the information they absolutely need to see if they are to hold the council to account over how it has mismanaged This Land Ltd over the last nine years.

KPMG's verdict on the elected members at CCC supposedly in charge of governance of This Land, and making decisions behind closed doors, is that they are not qualified to fulfil that role.  In its first eight years of trading, This Land Ltd sold just 76 houses, making an average comprehensive loss of £661,000 on every house.  It has outstanding borrowings of £120 million from CCC.  In the last four years This Land has sold £78 million of mortgaged land to keep its head above water, but failed to repay the corresponding £55.1 million mortgage principal to its lender, CCC, apparently with the latter's approval. This Land kept that money for itself.  Last summer CCC agreed a further loan of £6.3 million to This Land.  Yet during 2024/25 This Land has yet to pay a penny of the £8.5 million loan interest to CCC that the council relies on to support frontline services.  As at January 2025 (period 10), it was £7.4 million in arrears with loan repayments for the financial year.  Where has all the cash gone?  With that record, everybody within CCC still insists that the answer is yet more taxpayer-funded financial support for This Land rather than closing it down immediately.  

In the run up to the local elections in May, the public has no information other than the backward looking audited accounts to assess whether throwing more good money after bad is in taxpayers' best interests.  Logic, and the hard evidence contained in those accounts suggest it is not.  But concealing This Land's latest business plan from the public without providing a single cogent argument for doing so in a proper public interest test - especially when the last two business plans were published, is contrary to law, and smacks of desperation and cover-up.  This is not how local government should operate.  The impression is that concealing the business plan is simply politically-motivated censorship, to conceal the true picture of This Land's finances and prospects, at least until after May's local elections.