Teesworks report: Decisions "do not meet standards expected when managing public funds"

Tees Valley mayor Lord Houchen said: “I welcome the recommendations of the panel and my team and I are already working to review the recommendations to improve our processes and procedures in line with the report’s findings.”

Among the recommendations is that South Tees Development Corporation (STDC), chaired by mayor Ben Houchen, should “renegotiate a better settlement for taxpayers under the [joint venture] agreement.”

The report was commissioned by Michael Gove, Secretary of State for the Department for Levelling Up, Housing and Communities (DLUHC), after accusations in Parliament from Labour’s Middlesbrough MP Andy McDonald in May of “industrial-scale corruption” at Teesworks.

Lord Houchen followed calls at the time from Labour for a National Audit Office (NAO) investigation.

The report took 7 months to complete, with its authors criticising TVCA for presenting evidence “in an unstructured way and lacking a cohesive narrative”, leading to “drift and delay in the process and reduc[ing] our confidence that we have been given access to all relevant materials.”

They also write: “In the time available to the Panel, we have not been able to pursue all lines of evidence or examine all transactions,” instead focusing on six areas, including the establishment of the joint venture (JV) and the share transfer from 50-50 to 90% privately-owned.

“To the best of our knowledge,” the report states, “there is no formal partnership agreement that sets out the obligations of the JV partners, although it is clear [they] are heavily influential within the operations of the Teesworks site.”

It continues: “the JV partners have put no direct cash into the project and have received nearly £45m in dividends and payments, and hold £63m of cash.”

The panel said they were “surprised” a report ahead of the 50-50 venture’s establishment in 2020 contained “so little detailed explanation and implies there aren’t any material implications directly arising from this change in approach”, even though the result of the venture was “that two or three privately owned companies would likely receive significant financial returns”.

There was also the risk of “group think” according to the report due to the limited number of people making key decisions about the project.

“The core group of officers and (Tees Valley’s Conservative mayor Ben Houchen) held senior appointments in a number of relevant corporate bodies which in some cases gave rise to potential conflicts of interest.”

The mayor and the senior officers were “required to wear several hats due to their multiple appointments”.

“This gives rise to a risk of ‘group think’ due to the absence of challenge,” according to the panel’s report.

The Labour party responded to the report’s publication in the House of Commons calling for the Government to provide the NAO with the statutory powers it needs to conduct its own review into Teesworks, given the restrictions on the initial panel’s ability to comprehensively investigate.