Parliament tells Michael Gove to send National Audit Office to scrutinise Teesworks spend

The House of Commons Business and Trade Committee’s report on the performance of investment zones and freeports in England comes after hearing evidence from experts on the tax incentive schemes since June last year.

While assessing the benefits and governance of investment zones and freeports in England, the report pays special attention to Teesside’s freeport where the regeneration of the former Redcar steelworks, known as Teesworks, is currently taking place. It recognises the Teesside freeport’s “flagship” status within the Government’s freeports policy, and as such instructs Levelling Up Secretary Michael Gove to “direct the NAO to scrutinise the expenditure of public funds associated with Teesside Freeport, Tees Valley Combined Authority (TVCA) and South Tees Development Corporation (STDC).”

The transfer of shares in a public-private partnership to give property developers Chris Musgrave and Martin Corney 90 per cent control of Teesworks Ltd led to accusations in Parliament of “industrial-scale corruption”.

Despite calls at the time from both the Labour party and Tees Valley’s Conservative mayor Ben Houchen - who chairs both TVCA and STDC - to allow the NAO to investigate public expenditure on the project, Mr Gove instead commissioned an assurance review from three local government experts.

That review found “no evidence of illegality”, but made 28 recommendations for improvements in governance and transparency, stating it was not possible to presently assess whether or not value for money had been achieved on the project. Over £500m of taxpayers’ money has been spent, with Messrs Musgrave and Corney extracting at least £120m via dividends and other payments without investing any of their own capital.

Lord Houchen has previously said the share transfer, as well as changing the option for Teesworks Ltd (TWL) to buy land at £1 an acre instead of at market value, was necessary to expedite redevelopment, and that the private partners had taken on liabilities on the site.

However, the committee’s report states the legal documentation relating to that agreement “does not impose any such obligation on TWL to undertake remediation, and there is no evidence that TWL has yet done so.”

It continues: “As there is no obligation for re-development, this leaves a plausible scenario whereby STDC is left with stranded liabilities.”

Lord Houchen wrote to the committee in January arguing evidence submitted about Teesworks should not be considered since it was within the freeport area, but a separate entity. “It should be placed on record that STDC, and the Teesside Freeport, have two separate boards, their own individual governance structures and provide two separate and very different functions,” he wrote.

Last week shadow chancellor Rachel Reeves told The Yorkshire Post a Labour government would instruct the NAO to investigate the project if elected.

A Department for Levelling Up, Housing and Communities spokesperson said: “The Secretary of State already commissioned an independent report into the South Tees Development Corporation and Teesworks joint venture which found no evidence of corruption or illegality.

“It is not the National Audit Office’s role to audit or examine individual local authorities. The review was independent and expert, and Mayor Houchen has accepted all recommendations in the report.”