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Row over Teesworks ‘clean health check’ claims after NAO funding review

Ben Houchen, Mayor of Tees Valley. Photo: Tees Valley Combined Authority. Free use by LDRS partners.

A row over a supposed “healthy bill of health” for a mass regeneration program has erupted between familiar political foes.

Middlesbrough MP Andy McDonald and Tees Valley Mayor Ben Houchen have had a verbal argument over Teesworks on the site of the former Redcar Steelworks. The Regeneration Project has promised thousands of jobs on projects covering 4,500 acres of land south of the Tees.

Teesworks Ltd is owned 90-10 in favor of private companies. National Audit Office officials have taken a closer look at government arrangements with the Department of Business, Energy and Industrial Strategy (BEIS) which is also monitoring the project.

However, NAO officials said this was not an audit or review of the Tees Valley Combined Authority (TVCA), the development company or Teesworks itself – but of a review of Teesworks’ redevelopment memorandum of understanding, business case and quarterly monitoring reports.

The NAO found that the monitoring reports had indicated that the government funding had been used as intended and referred the ‘correspondent’ to the relevant BEIS unit, which is responsible for monitoring the project. Now Mr McDonald has said he strongly suspects the correspondence mentioned was his with the NAO earlier this year.

He told the Local Democracy Reporting Service that the NAO certainly didn’t say it gave Teesworks a “complete health check,” as TVCA officials claimed earlier this month. The Labor MP added that he had asked to meet the watchdog following his own “very serious concerns” about the use of public funds in the business.

He was told that the NAO did not audit local bodies – and that it was up to the external auditors – Mazars – to offer his qualification. Considering the government money given to the project, the watchdog took a look.

Mr McDonald said the NAO had referred him to quarterly monitoring reports – and claimed they indicated the Government was satisfied that the private partners were enriching themselves “at public expense” by moving their stake from 50% to 90%.

JC Musgrave Capital, Northern Land Management Ltd and DCS Industrial Limited own 90% of Teesworks shares while the South Tees Development Corporation (STDC) retains 10% after a deal struck in 2021.

Mr Houchen said the deal allowed the development company to ‘have its cake and eat it’ – arguing that private sector investment was ‘essential’ for the future of the former site of the ‘steelworks – and that a public body would still control it’. But Stockton North MP Alex Cunningham accused the mayor of ‘selling out the people of Teesside on the river’ over the deal.

He then accused the mayor of ‘dodgy deals’ during an opposition day debate in the Commons – before referring to the share deal. The Labor MP added: ‘The same management of the North Lands where one of the trustees donated not only the Mayor of Tees Valley’s political funds but also the funds of the North East Tory MPs.

“And Joseph Christopher Musgrave who gives his name to JC Musgrave Capital also donated to the Conservative Party. This all smacks of cronyism, but as our debate today has shown, that’s no surprise.

Mr Houchen responded in stride – staunchly denying the charges and saying the developers had played a key role in the expropriation process that secured a deal with Thai banks to bring the land under public control.

Now Mr McDonald has called the share deal ‘outrageous and corporate welfare on an industrial scale’ – adding that people are tired of being ‘ripped off’ and their money ‘being used for the benefit of businesses and individuals.

He was also unimpressed with the “spin” of the NAO verdict. The MP said: ‘There is a real question mark over value for money, but there are deeper concerns over the way this business has been conducted and the bad smell persists.

“But so far, far from providing a ‘vindication’ or ‘clean bill of health’ as ​​Houchen and his officials respectively claim, the NAO has said no such thing.”

A discussion of the Teesworks arrangements took place at the TVCA’s latest review and scrutiny committee this month after Middlesbrough councilor David Branson sought assurances over the next Middlesbrough development companies and Hartlepool.

Cllr Branson said he regularly read Private Eye – although he “didn’t always believe everything they said”. However, the Labor member wanted evidence that there would be transparency after reading the concerns.

Mr Houchen claimed Teesworks had seen ‘more eyes watching him than anything we’ve ever done’. “Much more than the airport,” he added.

“We had to take it to the joint authorities cabinet. Not only the leaders, but all the boards scrutinized it, and all the transactions, with a fine-toothed comb.

“It’s been through external auditors over the past two years, Treasury and BEIS have reviewed it three or four times each. You have to remember that there is public money going into it, so the government is not legally allowed to invest money in something that does not follow the right process, due diligence and transparency.

The Conservative mayor told the committee that Teesworks was a “very good example of public-private partnership”. Mr Houchen said: ‘Let’s not forget that the Teesworks site, when closed, would apparently cost over £1billion to knock down and clean up and cost the local authorities a fortune.

“Suddenly the same people who are complaining are saying this is the crown jewel and we’re doing something we shouldn’t have done. We’ve worked with an amazing private sector partner – we take a lot of credit for what’s happening – but I’m happy with the role we’ve played in it, but I guarantee you we wouldn’t have touched a single asset or hit destroyed a single thing or started a single square meter of remediation if it weren’t for the expertise of our private sector partners.

“I can guarantee it. They deserve a huge amount of credit that they don’t get.

The mayor went on to say that the public sector played a role in “priming the pump” while the private sector could provide the expertise. He claimed people were “trying to tear down what they were doing”.

Mr. Houchen added: “I can say that we did everything right. If people think I’m the kind of guy who does deals and signs pieces of paper, I’m not allowed to do that.

“I have Julie (Gilhespie – Managing Director) and an amazing team of leaders showing that everything is done right and processes are followed. Because everything is publicly funded, Julie has to spend hours and hours at the phone with BEIS, local government officials and everyone else too.

“There are a huge number of people who deserve huge credit for this.” Regarding Mr McDonald’s comments and concerns – Mr Houchen claimed that Mr McDonald was ‘foaming at the mouth’ with the progress of Teesworks and accused him of ‘spending far too much time at Westminster’ and to play political games.

Mr Houchen said: ‘As we try to build a better future for Teesside, Darlington and Hartlepool, he is trying to do everything he can to stop it. We are in the midst of a cost of living crisis that we have not seen in generations.

“We have had the announcement that the price cap will increase by 80%, which will take the average energy bill to over £3,500 a year. People are worried.

“They are afraid of what this could mean for them and their families in the months to come.” He went on to accuse Mr McDonald of ‘fabricating outlandish allegations and conspiracy theories’ as a result of this pressure – ‘instead of focusing on what matters’.

TVCA’s Audit and Governance Committee this week heard from the external auditors that Mazars had completed their external audit of the financial statements for 2020/21 and intended to issue an “unmodified opinion”. Mr McDonald said he would continue his inquiries.