Where will the multi-million This Land debt end up after Cambridgeshire local government reorganisation?

Residents could end up paying millions for the financial problems of other authorities if new unitary councils are created, it has been claimed.

The concern relates to money owed to Cambridgeshire County Council by its development company, This Land, which could be shared across any successor authorities under the reorganisation.

The council has loaned £113.85m to This Land, invested £5.85m as equity and last year it handed over a further £6.3m due to a worsening economic outlook for housing developments.

After auditors said there was a “high probability” This Land would “default” over the lifetime of the loan the authority restructured the finances, converting about £60m into a grant. This Land has said it “acknowledges the concerns” and was focused on completing its existing developments.

A county spokesperson said it was “likely that any successor authorities will be shareholders in This Land”, though the details would be for the new councils to decide.

East Cambridgeshire District Council, one of the few debt-free authorities in the country, said the risk was unacceptable.

“We are immensely proud of the fact we are debt free,” a spokesperson said. “And it goes without saying that we are hugely concerned that both Cambridgeshire County Council’s debt and This Land’s debt would have to be absorbed across the new unitary authorities.”

The three options proposed by councils are:

▶ A – One unitary authority for Peterborough, Huntingdonshire and Fenland, and another for Cambridge, East Cambridgeshire and South Cambridgeshire;

▶ B – One unitary council for Peterborough, East Cambridgeshire, Fenland and Huntingdonshire, and another for Cambridge and South Cambridgeshire;

▶ C – One unitary council with Peterborough, East Cambridgeshire and Fenland, and another for Cambridge, South Cambridgeshire and Huntingdonshire.

East Cambs is backing proposal B in what it calls a “northern economic powerhouse”. It argues this option would keep council tax lowest for residents and bring the greatest investment in services.

“All the other options on the table would see East Cambs residents paying more for the bad financial decisions of other councils,” a spokesperson added.

A Cambridgeshire County Council spokesperson said: “It is likely that any successor authorities will be shareholders in This Land, however, the details of future shareholders and administrative oversight will be for the successor councils to negotiate.

“Cambridgeshire County Council will engage in this process, but the decision will be led by the successor authorities.”

A Cambridge City Council spokesperson said it had nothing to add to the county’s statement. South Cambridgeshire District Council was contacted for comment.