Council plays down fears over £120m housing loan

A council has played down fears over a £120m loan it lent to its house development company amid warnings the firm risks collapsing.

This Land was set up to develop properties on Cambridgeshire County Council-owned land in 2016, but has yet to turn a profit.

After auditors said there was a "high probability" This Land would "default" over the lifetime of the loan the council restructured the finances, converting about £60m into a grant.

Elliot Tong, a Green Party councillor on the authority, said taxpayers' money was in a "failing" company, while the council's finance chief said "no council tax money has been lost".

This Land has said it "acknowledges the concerns" and was focused on completing its existing developments.

This Land was set up by the county council and it claimed to have facilitated close to 1,000 homes, either by directly building them or by selling land.

It has been financed by council loans, with £120m outstanding.

The authority's auditors KPMG recently warned: "Due to the declining performance of the This Land group there is an increased risk that the entity will be unable to recover the full value of the loan."

Michael Hudson, the council's executive director for finance, said it was now due to receive back £126m, having restructured finances, including converting nearly £60m into a grant which would be repaid dependent on future performance.

But Tong said the council had been "given their money in order to improve the roads, improve the streets, improve their lives, but this money is instead wound up... in the hands of a company which, frankly, are failing".

He accused the council of "effectively" writing off the grant.

Mr Hudson said "like any construction and development company it takes a number of years to get moving".

When asked where the money had gone so far, he said "a large element has gone into paying back the interest to the county council", and reassured residents that money would not be lost.

He said the company had "provided Cambridgeshire with affordable housing" and that the "income received enabled this council not to have to make as many difficult financial decisions as other local authorities around the country".

Lucy Nethsingha, the Liberal Democrat leader of the county council, said "This Land was set up by the Conservatives... at a time when the Conservative government was encouraging councils to take on risky commercial activity.

"Liberal Democrats opposed the way the company was set up, and since taking control have worked hard to reduce the risks involved.

"The restructuring of the company finances is another step on the path to reducing the risks to public money.

"Our approach to running Cambridgeshire has always been to make sure the best interests of residents are our top priority and that remains the case as we deal with the Conservatives legacy in Cambridgeshire."

Rob Williams, This Land's interim chief executive, said since the auditor's report it had "worked closely with the council to complete a restructure of the company's financing to address issues raised and ensure there is a sustainable and appropriate financial approach going forward".

He added: "Under the proposed plan, This Land will return to the council at least the equivalent of the original cash investment over the loan's lifetime, through a combination of loan repayments and interest payments, ensuring that council taxpayers have not lost money."

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