Cambridgeshire County Council secretly slipped a further £6.3m loan to its wholly owned housing company, This Land Ltd, to add to £127m of loans and £5m of equity it had previously provided to them. The additional loan was agreed last July by the council’s strategy and resources committee, but they kept it secret at the time; a motion was passed for the press and public to be excluded.
The council later noted that “the committee received a report on This Land – monitoring and financing. It was resolved unanimously to agree the recommendations set out in the report”.
However, in a financial report to the October committee it finally revealed details of the additional loan, reporting that “This Land has previously been issued with £127m of loans and £5m of equity.
“The final loan included a drawdown facility that was never utilised for £6.3m; based on their current cashflow position, This Land have now requested to draw this down, which was agreed by strategic and resources committee in July.
Focus on council owned housing company
“The scheme is forecasting expenditure of £6.3m in 2024-25, prudential borrowing of £5.9m and £400k of equity”.
The same month the committee heard of pressures in the finance and resources directorate relating primarily to lower than expected income from the council’s investments, “particular in its wholly owned housing company This Land.
“It is prudent to forecast a pressure in this area, as by year-end the current position of the company will be clearer following the submission of its full business plan to the council in November.
“This may necessitate support to the company or a further earmarked reserve provision by the council, otherwise this forecast overspend will be unwound”.
This Land was due to submit a business plan to the county council in November “which will provide a detailed overview of the company’s outlook and performance.
“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”.
But the expected business plan did not meet the timescale previously touted for in December the strategy and resources committee had removed November from its reference to This Land. It simply recorded that that the “current position of the company will be clearer following the submission of its full business plan and its subsequent review by the council.
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“This may necessitate support to the company or a further earmarked reserve provision by the council, otherwise this forecast overspend will be unwound”.
Next meeting of the committee is scheduled for January 28 but the most recent publicly documented reference to This Land from the council says that “a few external factors have given rise to delays the company’s current business plan deliverables, and therefore there is a risk to the level of interest payments in 2024/25 and it is prudent to provide for this”.
A clue about the council’s view of This Land came in December from its leader, Cllr Lucy Nethsingha, responding to questions from Guy Lachlan, the unsuccessful Reform UK candidate for St Neots and Mid Cambridgeshire in the General Election.
Mr Lachlan said: “According to their most recent filings at Companies House, This Land, a property development company wholly owned by the council, has net debts of £99 million with all their finance to date provided by CCC in the form of loans to the tune of £114 million.
Focus on council owned housing company
“At the time of filing their 2022 accounts they’d accumulated operating losses of about £27 million excluding financing costs. No doubt the 2023 figures will be even worse when they file those.”
He then quizzed her on the loan, made in July, of £6.3m.
“No details available to the public regarding the business case for this additional loan, which may also have broken rules forbidding councils from borrowing to fund commercial ventures,” he said.
“I would like to ask the leader of the council what criteria the council are assessing in order to be confident that the council’s financial exposure to this risky commercial venture is in taxpayers’ best interests”
Cllr Nethsingha replied that “the council, as sole owner of this company, set up in 2016, continues to review and ensure that its relationship with the company continues to be best value.
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“The company has enabled the building of nearly 1,000 homes, including 300 affordable homes, with plans to deliver over 4,700 more of which around 1,700 will be affordable.
“In continually assessing the value of the company we hold regular meetings to discuss progress and performance, as well as to ensure the company is following its business plan and provides security for our loans.
“Unfortunately, given the commercial nature of the matters in hand, we cannot always disclose every detail, and we continue to strike a balance between the public interest in information about This Land and the commercial interest of the company to undertake those transactions effectively.
“However, we have always sought where we can, to be open and that includes the very detailed and public shareholder review of This Land from the external consultancy Avison Young, which made significant improvement recommendations.
“I can confirm that a decision was taken in July to extend the company’s loan to the previously agreed limit, and we have again been open in the impact of that in our regular budget monitoring.
“As part of its decision making, the council sought advice on the ability to make that decision.
Focus on council owned housing company
“The council will continue to review the company’s business plan, its performance, financial reports, and the wider market to ensure the best outcome for taxpayers and in doing so, we will take all the different ways in which we might take forward our investment in This Land and This Land’s business success while balancing that with the limiting of further exposure to risk”.
In a supplementary question Mr Lachlan said: “To me, it just illustrates once again why public authorities should never get involved in trying to run private sector business ventures. Just let the private sector do their thing.
“If they succeed, they employ your constituents and pay lots of taxes and if they fail, they are well-established insolvency processes that ensure minimal collateral damage by their failure.
“If This Land were to fail, it jeopardises everything the council should be doing, which in turn puts you in an awful catch 22 position and potentially be unable to stop funding even when you should.
“I appreciate the setting up This Land was not the work of your administration, but as the current representative of the taxpayers 100 per cent shareholding in the company, could you please for the record confirm that the current management of This Land still enjoys your full confidence, and by extension, the confidence of your party.”
Cllr Nethsingha replied: “I have absolute confidence in the officers and the people involved in this council, in the management of This Land and our relationship with them to make sure that we are making our decisions absolutely in the best interest of taxpayers in this county.”
Mr Lachlan protested his question had not been answered since “the question I asked was whether the management enjoys the leader’s full confidence and by extension, that of her party”.
Focus on council owned housing company
However council chair Cllr Sebastian Kindersley intervened, pointing out that “ I think Councillor Nethsingha has answered as much as she able or willing to do. So it remains for me to thank you very much for coming along this afternoon and obviously I hope you stay for the rest of the meeting, which I hope you find of interest”.
Ten days ago, This Land Ltd filed its annual accounts made up to 31 March 2024. It revealed a 2023/24 loss of nearly £12m.
Interim chairman Jeremy Miller and interim CEO David Meek say the year had seen a “marked step change in the scope of the group’s activities and of its clarity of purpose and mission.
“Significant restructuring and improvement in the group’s leadership team and processes has been undertaken involving a thorough review of every aspect of the group’s activities.
“In close co-operation with our shareholder, the group has been working on a long-term strategy and business plan to deliver on the shareholder’s aspirations, which we expect to conclude upon in early 2025.”
Both feel Labour’s focus on addressing the acute housing shortage with the introduction of housing targets could see a substantial increase of the supply of new housing.
“Given the group’s unique position in Cambridgeshire, This Land Limited is well placed to play a key role in delivering the new housing for the county,” they say.
They believe 2024 “marked a year of transformational change for This Land Limited, with significant restructuring and improvement in the group’s leadership, governance, risk management and controls.
Focus on council owned housing company
“A full review has been undertaken across every aspect of the business and a reset of all assumptions and forecasts, both of the original legacy assets and the forward-looking projections.
“Accordingly, the group’s business plan represents a new and exciting milestone in the group’s development as an important asset and delivery mechanism for both financial rigour and community benefits”.
It claims its new business model “is resilient and allows us to be flexible in the timing of our development activities and planned land sales.
“It delivers performance across multiple strategic lines of business which deliver sustainable growth and substantial long-term benefits.
“These benefits include the delivery, or facilitation through planning, of over 5,000 houses, of which c2,OOO are affordable under the commercial objectives.
“The directors are confident that the current business plan is achievable placing the group in a good position to navigate through the challenges experienced in the housebuilding industry.”
Breaking Ground on Eddeva Park in October 2023: This Land kicks off its latest project – the Eddeva Park housing development, situated between Babraham Road and Worts’ Causeway in south-east Cambridge (right) with (left) David Meek, interim CEO. PHOTO: This Land Ltd
