The government review of the Teesworks regeneration site has found no evidence of corruption but does find that “there are issues of governance and transparency that need to be addressed and a number of decisions taken by the bodies involved do not meet the standards expected when managing public funds.”
The Teesworks review was set up by Levelling Up Secretary Michael Gove last May, after allegations of corruption were made in the House of Commons by Middlesbrough MP Andy McDonald. They have always been contested by Tees Valley Mayor Lord Ben Houchen.
A total of £560m of government grants and borrowing is being invested in the site. The review panel was headed is by Lancashire County Council chief executive Angie Ridgwell.
Michael Gove has now written to Houchen giving him until 8 March to let him know how he intends to respond to the 28 recommendations in the report before he (Gove) decides on further action.
The panel’s report says: “There are many voices which articulate a positive view of the project, highlighting the work that has been done and the clear evidence of the achievements which have been made in regenerating an historic part of the UK’s industrial heritage, the final demise of which, in 2015/16 had devastating results for a community that had been badly affected by the changing global patterns of industrial production.
“A significant amount of regeneration of the area has occurred and new businesses are moving in bringing jobs and other collateral benefits for the local area. Consequently, there is good support for the redevelopment of the site.
“However, there has also been growing concern about the operations and delivery of the Teesworks project with allegations of corruption, wrongdoing, and illegality, which is impacting confidence in the project and putting future private sector investment at risk.”
The panel concludes that the systems of governance and finance in place within Tees Valley Combined Authority (TVCA) and South Tees Development Corporation (STDC) at present do not include the expected sufficiency of transparency and oversight across the system to evidence value for money.
“It is important that local leaders work together,” it says, “to secure the much needed regeneration of the site. Securing permanent local jobs, economic growth and opportunity, as well as increased tax income for the local area that can be reinvested in local services and continued growth is a priority and shared endeavour. To this end we have made a number of recommendations for the Secretary of State, TVCA and STDC to consider.”
The 28 recommendations are designed to strengthen overview & scrutiny (O&S), transparency and audit, avoid conflicts of interest and if possible renegotiate a better deal for taxpayers.
There is criticism in the report of officials (officers) whose duty is to advise TVCA on (O&S): “The Panel have seen no evidence that any of the monitoring (legal) officers have advised TVCA that they can review their delegations and directions to STDC at any time. Nor have they reminded TVCA of their duty of oversight of STDC…
“It is the view of the Panel that STDC should have referred more decisions to TVCA Cabinet and that TVCA O&S Committee had a legitimate right to scrutinise STDC decisions… These referral decisions would have aligned with the supervision duty of TVCA and addressed the value for money test. STDC executive do not agree with the Panel’s view.”
The leaders of Tees Valley’s five councils and their top officials also come in for criticism for having a limited understanding of what was going on within STDC and little curiosity to explore and understand the decisions being made.
The panel found that reports on which the STDC board was to make important decisions were of variable quality, sometimes late and sometimes containing incorrect and incomplete information.
The panel is highly critical of the way the Teesworks Joint Venture (JV) was set up between STDC and its private partners, with STDC officials showing poor judgement while the private partners, Chris Musgrave and Martin Corney, were astute businessmen who got the better of them:
“At this juncture;” says the report,” the JV partners have put no direct cash into the project and have received nearly £45mn in dividends and payments, and hold £63mn of cash from the SeAH [monopile factory] income strip in TWL (Teesworks Ltd) accounts. They have contributed their intellectual capacity and human resource from their own companies at no cost to the JV and there is little doubt they have bought pace to delivery that would not have been achievable by STDC alone. The JV partners see no prospect of renegotiating a deal that rebalances their relative advantage over STDC.”
Transparency and governance
The report says the panel received concerns about openness, transparency and Freedom of Information (FoI) requests. This extended to eternal stakeholders and even the Review Panel experienced some challenges in getting the necessary information in an accessible way.
“The panel members concluded that the level and nature of the transparency and accountability associated with this project hasn’t always met the standard which they would consider appropriate for a publicly funded project of this scale and nature.”
Members of TVCA O&S Committee, says the report, expressed frustration at the lack of information provided which they felt undermined their ability to scrutinise the activity of STDC and TWL (Teesworks Ltd), and members of the TVCA Audit Committee expressed similar concerns.
TVCA’s former monitoring officer had, in a report dated 15 September 2021, provided written advice to the O&S Committee to the effect that the committee’s reach didn’t extend to bodies such as the STDC. This advice was at odds with the provisions of the TVCA constitution and legislation.
The report states: “There is little evidence of STDC referring to or seeking consent from TVCA Cabinet on matters that would appear to fall within the relevant categories or due to their nature might reasonably be regarded as of legitimate interest to TVCA members.”
The report ends with the words: “Based on the evidence from the review the governance and financial management arrangements are not of themselves sufficiently robust or transparent to evidence value for money.”
Gove’s letter to Houchen
Levelling Up Secretary Michael Gove, who set up the Teesworks Review last May, has now written to Houchen to say he knows the Mayor will welcome the conclusion that no corruption was found. “They also note that the pace and scope of the regeneration has had wide-reaching positive impact on the local economy, which we all welcome.”
He adds: “The panel report identifies a ‘need to strengthen governance and increase transparency which can be done with limited impact on pace of delivery’ and makes recommendations as to how to address these by strengthening scrutiny and improving public accountability to the residents of Teesside. There are some specific areas for improvement and lessons to be learned, which I know you will also welcome.
“I am grateful for your assurance that you stand ready to accept in principle the recommendations, while recognising that the panel also made recommendations to government which will be carefully considered and to which I will respond in due course. I ask that you now engage with the panel’s recommendations, working with the combined authority and partners as appropriate, and provide me with an initial report by 8 March on how you intend to respond to the Panel’s recommendations. I will not take decisions on further action until you have responded. My officials stand ready to support yours, with your response to these recommendations.”
Mayor Houchen told the BBC he welcomed the panel’s recommendations, which he said his team were already working on to improve processes and procedures in line with the report’s findings.
“The people of Teesside, Darlington and Hartlepool can welcome this investigation, which sets out in black and white that there is no corruption or illegality at Teesworks,” he said.
TVCA chief executive Julie Gilhespie: “The conclusion of this review means we can now move forward in delivering vital investment and jobs for the people of Tees Valley.”
Teesworks said they were pleased, but not surprised that no evidence of corruption or illegality had been found. “We can now focus all of our attention on bringing the much-needed jobs and investment to the site for the benefit of the people of Teesside.”
But Andy McDonald, MP for Middlesbrough, who first raised the issue in the Commons last May, told BBC Look North: “When we get to the meat of it we discover there are major flaws that the panel have settled on in terms of governance, finance, accountability, process…This is a damning report and it’s done its very best to work within the parameters set by Michael Gove to give it the kindest twist it possibly can and yet this is what we hear.”
The full report can be read here.