South Tees Development Corporation (STDC), part of Tees Valley Mayor Lord Ben Houchen’s empire, is failing to comply with a financial code designed to ensure that the borrowings of local authorities like the STDC’s parent body, Tees Valley Development Corporation, remain affordable.
STDC has loans of hundreds of millions of pounds which it has borrowed mainly from TVCA to regenerate the Teesworks site at Redcar for industry. The management of such debt falls under the STDC’s Treasury Management Strategy (TMSS), which is supposed to comply with the Chartered Institute of Public Finance and Accountancy’s Public Services Code of Practice (the CIPFA Code).
But in STDC’s case it doesn’t.
The non-compliant TMSS was approved by the STDC board on 10 June 2025 at its last meeting under the chairmanship of Tees Valley Mayor Lord Ben Houchen before he was forced out of the position by government pressure. It reported that all treasury management activities during 2025/26 would comply fully with the CIPFA Code.
But they didn’t.
The board will meet again on 15 January to learn and approve what new interim group director of finance and resources, Jo Moore, is doing to bring STDC and its finances back into line.
Treasury management
The first thing the board will be told is that the Corporation’s capital financing requirement (CFR) – its underlying need to borrow – had been calculated in the TMSS as £254.44mn.It should have been £470.85mn – an error of £216.41mn.
On this incorrect basis, the TMSS approved in June forecast external borrowing for the 2025/26 year at £257.374mn. But no authorised limit or operational boundary was placed on this, and by the end of September actual borrowing had already reached £397.87mn. The board is now being asked to make that sum the limit and boundary for the rest of the year.
As reported by NEB on 15 December, these loans come mainly from TVCA, which in turn borrows the money from the Public Works Loans Board and the UK Investment Bank.
Any surplus resulting from day-to-day cashflow has not been invested overnight in line with the TMSS. TVCA pays all creditor from its own bank account, but thus receive less interest on itsown overnight balances. The resulting lost interest over the year is £164,036 for STDC and £365,686 for TVCA.
TVCA has been undertaking both treasury management and management of the STDC bank account through informal arrangements. However, there is no formal agreement for comprehensive treasury management services for STDC. TVCA currently receives these services under a Service Level Agreement (SLA) with Stockton Council. It is now being proposed that STDC should enter into its own formal SLA with Stockton.
Comment
Every stone turned over at the TVCA group uncovers a new worm hill. It is astonishing that STDC, should – still under the chairmanship of Houchen – have produced such an erroneous Treasury Management Strategy 17 months after the Tees Valley Review reported to the government that TVCA was not meeting standards expected when handling public funds, and two months after a best value notice had been slapped on the Combined Authority by the Ministry of Communities and Housing and Local Government. Only now it seems, with a new top team of officials in place, are lessons beginning to be learned.
Meanwhile, as STDC grapples with all the public debt accumulated as a result in paying for the remediation of the Teesworks land, its private sector partners who managed to grab a 90% share in the site, raked in another £29.7mn in dividends for 2024/25, as NEB reported on 7 January.
