CORNWALL councillors have been extremely critical of the local authority’s arm’s length building company Treveth.

One said the house-building entity would be declared insolvent if it was a “normal” company, while another said the council would be better off buying houses and “getting rid of Treveth”.

Treveth was created by Cornwall Council in 2019 with a mission to provide high-quality sustainable new homes, communities and commercial spaces for the benefit of people who live and work in Cornwall.

Operating under a ‘profit with purpose’ ethos, all surpluses generated by Treveth’s activities are returned to the council for use in public services.

A meeting of the council’s audit committee has heard that Treveth is expected to return a profit in the next two years. At the end of this financial year, it was operating at a loss of £8.3-million.

Capital repayments due to Cornwall Council on loans taken out by Treveth stood at £90.8-million at the end of March. The value of its properties stands at £41.5-million.

Treveth managing director Tim Mulholland told councillors it currently has 170 homes under management, 375 homes in build and about 700 homes planned for the next three to four years. “All of the homes have gone to local people and definitely not used as second homes or holiday lets,” he said.

The very first business plan approved by the council in 2019 saw a target break-even point in 17 years, which included schemes it inherited from the council. “Through the management of those schemes and by introducing new schemes which are non-council owned, we are now predicting we will break even in year seven,” said Mr Mulholland, adding that Treveth’s housing plan will “make a very substantial return to the council in the next few years”.

However, several members of the audit committee were critical of the company. Co-optee Peter Norvill told the Treveth board: “Structurally, your cost of administration is more than your sales. If you were in the private sector, you’d have to do a sustainability model for your ability to be a going concern.”

Cllr Philip Desmonde (Conservative, Pool and Tehidy) pointed to current liability at £72.4-million and net current assets at £36.4-million. “I have quite a strong construction background and it’s my experience that where your current assets are nearly half of your current liabilities and you start talking to your bank, there are some really heavy-duty red flags being waved,” he said, suggesting this would lead to insolvency in any other company.

Mr Mulholland reiterated that the company was set up in the knowledge that it would be “under water” for a long period of time.

“At the moment you could declare us insolvent if we were a commercial business working to commercial parameters, but our funder or our bank is the council,” he said. “Everything we do is within the direction of travel in which the council asked us to trade.”

Mr Mulholland added: “Our auditors have signed off our financial reports. There is no mention of insolvency in anything. At no time in the five years we’ve been operating has anyone raised that concern.”

Adam Ronaldson, Treveth’s finance director, pointed to business plans projecting a break-even point within 17 years. “Our current business plan is showing us bringing that break-even point forward to year seven/eight,” he said.

Cllr Steve Arthur (Non-aligned, Perranporth) entered the debate, expressing “serious concerns” about Treveth. “If you look at the money we’re putting into it, if our ambition is to get more people out of the housing register, we’d be better off going out and buying houses off the shelf and just getting rid of Treveth.

“I think we are a bank, we do have shareholders and they are council tax payers. This council is getting into debt faster and faster, and we’re just featherbedding a company which isn’t providing the houses that it should.”

Treveth’s MD challenged this view: “We were asked to deliver open-market housing as part of the housing supply issue in Cornwall - and private rent, which is a massive issue still. It takes a while to set a development company up. We’ve been going for five years – we saw 116 units last year and hopefully we should see 145 this year.”

Mr Mulholland referred to testimonials suggesting that Treveth had made a “huge difference” to the lives of those who move into its housing, including enabling children to remain in the same school or exchange temporary accommodation for shared ownership.

“We don’t take lightly the fact that we’ve got a responsibility to deliver to the communities we build in,” he said.

Mr Mulholland added that the supply chain was weakened in Cornwall by the insolvency of construction company Midas and in the current economic conditions there is a “reduced risk appetite” within local and regional contractors.

“In terms of the last 18 months, we’re the biggest developer in Cornwall,” he said. “We’re the only real scale developer of housing in Cornwall.”

Cllr Tamsyn Widdon (Green Party, Penryn) added: “Just because we’re not seeing a return yet, I just wanted to highlight how we’re going above and beyond - we’re leading the way.

“We are doing fantastic things and we’re delivering in a very complex, difficult market in a way that returns more to the communities here.”

Following the meeting, members of Cornwall Council’s cabinet defended Treveth’s position.

Cllr David Harris, deputy leader of Cornwall Council and portfolio holder for resources, said: “Treveth is a company owned by Cornwall Council and is not insolvent. Treveth builds homes for local people and keeps most of the homes it builds to rent to local people.

“Keeping homes for rent rather than selling is part of the core purpose of Treveth, and means we have to wait longer to get our planned financial return. Treveth has a 40-year business plan; costs are front-ended with profits accruing later in the business plan.

“Treveth has a signed off set of externally audited accounts and is delivering against its business plan.”

Cllr Olly Monk, Cornwall Council’s portfolio holder for housing, said: “Treveth is doing a great job building really good houses that local people can rent. I absolutely support renting out the homes, even if we don’t get a financial return as quickly as we would if they were sold. I am confident in the long-term financial stability of the company.”

Treveth MD Tim Mulholland added: “The context of the question asked at the audit committee was in relation to traditional house building companies. Treveth is not such a company - we are an innovative partnership aimed at addressing the very real issue of local housing provision for local people in Cornwall.

“As such we welcome the continued support of Cornwall Council alongside the significant number of local companies that help us deliver our homes.

“Treveth is not only impacting the number of new homes it is also a significant contributor to direct and indirect jobs in the Duchy and I would like to reassure each and every one of our suppliers and the tenants in our homes that we are not insolvent and we will continue to contribute to Cornwall, its people and economy, for years to come.”