Combined Authority Best Value

Thursday 15th October 2026 Written Statements

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Jim McMahon)]

The Government are committed to a radical shift in where power and resources lie, empowering local leaders to drive growth and improve outcomes for their communities. But stronger local leadership must be matched by strong local institutions. As powers and investment increase, so too does the responsibility to demonstrate strong governance, sound financial management, transparent decision making and effective stewardship of public resources.

It is a matter of public record that, following the publication of the independent Tees Valley review in January 2024 and the mayor’s response, Ministers required further assurance of improvement. On 3 April 2025, the Department therefore issued Tees Valley combined authority with a non-statutory best value notice, which set expectations for improvement around governance, culture, partnerships and continuous improvement, including action to address recommendations from the 2024 independent review. That notice was due to be formally reviewed after 12 months.

The Department has engaged closely with the authority and its independent improvement and advisory board to scrutinise progress against the notice and the authority’s organisational improvement plan. I commend the commitment of officers and the engagement across the Cabinet and constituent authorities to support the authority’s improvement work. I recognise the complexity of unpicking historic governance and accounting issues, and that, as improvement work has progressed, further matters requiring attention have been identified. However, despite sustained improvement efforts, I am not yet assured that the authority has the capacity, capability or appropriate arrangements in place to respond with sufficient pace, transparency or consistency to the level of remaining risk.

In particular, I have material concerns about the authority’s long-term financial sustainability, given its high levels of debt, increasing borrowing and interest costs, and declining revenue reserves in recent years. I welcome the authority’s recent agreement of formal loan repayment arrangements with South Tees Development Corporation, including changes to strengthen Cabinet oversight. However, those steps do not in themselves provide assurance on the assumptions underpinning the repayment arrangements or the management of associated financial risks, on which I would like direct, independent assurance. More fundamentally, the effectiveness of these arrangements ultimately depends on strong leadership, governance and financial management, where broader concerns remain.

I note the external auditor’s indication in its 2024-25 audit update report that it is considering further exercise of its statutory powers in response to concerns about the authority’s governance and control environment and the delays in completing and signing off financial statements for 2023-24 and 2024-25.

Although governance and assurance improvements are in train, including through the development of the single assurance framework, I remain concerned about the scale of work outstanding to deliver and embed those improvements, and evidence their impact.

Having considered all available evidence to date, including from the authority, its independent advisory board and the external auditor, I consider there are signs of potential best value failure. 1 am therefore informing the House that the Secretary of State has today exercised powers under section 10 of the Local Government Act 1999 to appoint Laura Shoaf CBE as lead inspector, and, on Laura’s recommendation, will shortly appoint three assistant inspectors to carry out an inspection of the authority’s compliance with its best value duty.

The inspection will provide an evidence-based assessment of the authority’s compliance with its best value duty, focusing on, but not limited to: governance and decision making across the authority; use of resources and audit and accounting arrangements; capacity and capability at leadership level and across the organisation; the adequacy of the authority’s plans and capacity to deliver its organisational excellence strategy; and how these functions and arrangements are impacting organisational culture, partnerships and community engagement, and service delivery.

Given the scale and complexity of the authority’s commercial and regeneration activities, I would welcome expert assurance that appropriate arrangements are in place to oversee and mitigate the associated risks.

Our new model of Government rests on strong and capable strategic and local authorities and I am committed to taking the action necessary to secure this. The best value framework is an established and proportionate accountability backstop. It supports improvement where concerns arise and enables intervention where necessary, acting to ensure that strategic authorities have the right accountability, capacity and capability that protects residents and public money, reinforces public confidence and provides a secure foundation for devolution’s resilience.

Further devolution will be rolled out as quickly as possible, and additional powers and control, as set out in the Cabinet statement, will be available to Tees Valley combined authority as with all mayoral strategic authorities, benefiting the people of the Tees Valley. Further detail on the approach, including any phasing, will be set out in the delivery plan this autumn.

My Department will continue to engage with and support the authority throughout this process. I will update the House once the inspection has concluded.

[HCWS384]