Teesworks Joint Venture

Baroness Pinnock Excerpts

Tuesday 30th January 2024 Lords Chamber

[Baroness Taylor of Stevenage (Lab)]

My Lords, at the heart of this issue are the people of Teesside and the public asset formerly owned by them, which should be regenerated for their benefit, to generate jobs, employment and industry. They should also be receiving sufficient return for their investment of land and the other value of the site. The governance of the project should ensure an appropriate sharing of the risk taken by the private sector partners in order to justify the returns they have already accrued, as documented in the review. For the Government to suggest in this Statement that the report exonerates all those involved from any questions about what has happened and to insinuate that local MPs’ challenge of the many issues explored in the review was them using the communities of the north-east as a political football is simply not appropriate.

We understand that the project is complex. I have experience of instigating and overseeing a billion-pound regeneration project, so I understand the complexities that can arise. We also recognise that, in an area like Teesside, the urgency of moving at pace on a project which is going to generate jobs and employment is vital. However, that should not give any of those involved carte blanche to ignore the absolute necessity for the project to follow the strongest principles of probity, governance, transparency of decision-making, procurement practice, scrutiny and best value.

This very thorough and detailed report delivers a scathing assessment of the way those principles have been treated. Its 28 recommendations highlight: the need for reviews of financial regulations; better oversight and scrutiny; the make-up of the board; reporting to the board; that the public interest test should be foremost in terms of transparency; and that not enough attention is paid to conflicts of interest, including those of the mayor. Very seriously, the report highlights procurement issues, including the decision in August 2021 to change the balance of ownership in favour of the private owners to a 90:10 split, and the issue of the balance of risk between the public and private sector, when, to date, the public sector seems to have taken the bulk of the risk and been responsible for the costs invested, while the private sector has had the benefit of the profits. I am sure this way of operating would have gone down as a wow factor on “Dragons’ Den”, but has it really all been in the best interest of the people of Teesside? Have they got value for money for their public investment?

The concerns outlined in the report are absolutely not minor or trivial matters. The Minister made much of the fact that the report concludes it did not find evidence of illegality or corruption. Well, good, but surely we have learned from recent high-profile scandals, such as the Post Office Horizon issue, infected blood, and the supply of PPE, that there may be ways of operating that, while not strictly speaking illegal, are certainly not desirable or acceptable.

This scandal has exposed gaps in accountability and proper attention to local democratic scrutiny and a failure to follow the principles of spending public money, which makes it clear that there should be a further investigation by the National Audit Office. The NAO has already indicated that it would be willing and able to carry out that review. The people of the north-east surely deserve reassurance that every pound of their money invested in this project will count and will deliver sufficient return—especially as the private sector developers seem to have reaped a pretty healthy return, with little or no investment. So I ask the Minister: will a proper accounting review by the NAO will now be undertaken?

I understand that the chair of the Public Accounts Committee called the metro mayors together when they were elected and suggested they put robust auditing arrangements in place—as, following the abolition of the Audit Commission, there was no regulated accounting for them. The accounts published recently for Teesside were the first for the public to see. Is the Minister reassured that the advice of the PAC chair was taken?

This review represents a scathing indictment of what has happened on Teesside, and if we are to grow the country’s economy at pace and scale, as is my party’s ambition, surely it is important to understand the detail of the lessons that need to be learned. What steps did the Government take to ensure that officials who have previously worked at South Tees Development Corporation or public bodies on Teesside were free to comply with the investigation, regardless of any non-disclosure agreements they may have signed? The report itself cites that a former monitoring officer who advised on some of the significant decisions—including the move to 90:10 ownership—

“was invited to interview but declined because they felt their professional duties barred them from participating in the review”.

Can the Minister answer the question that so many local people are asking about the sale of scrap metal and aggregate from the site? Is she reassured that an appropriate share of the benefit from those sales has gone to local people?

To conclude, while we all accept that there is a need for major regeneration projects to proceed with pace, is the Minister satisfied with a report which found that:

“We did not see sufficient information provided to Board to allow them to provide effective challenge and undertake the level of due diligence expected of a commercial Board”?


There has been no private finance invested to date, while over £560 million of public funds have been spent or committed. Outcomes are reported quarterly to government, in line with the agreed criteria. However, these do not record the cumulative position on either costs or benefits, nor do they compare the current overall position in respect of costs or benefits with those set out in the business case.

Inappropriate decisions and a lack of transparency, which failed to guard against allegations of wrongdoing, are occurring and the principles of spending public money are not being consistently observed. Does the Minister conclude that the people of Teesside got value for money for their very considerable investment? Does she conclude, as the Minister in the other place did, that there should be no referrals onwards to other bodies for further review? Surely this damning report asks more questions than it answers—questions that the people of the north-east deserve and have a right to have answered.

I will finish with the final words of the report, which ask the questions so many local people, including the Northern Echo, want answered. The report says that:

“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”.


What are the Government going to do about this?

[Baroness Pinnock (LD)]

My Lords, I thank the Minister for the Statement. What a sad state of affairs it is that a vital and very large regeneration project in the north-east of England has to be the subject of an independent government review because of justified public criticism and concern.

The Financial Times and the Yorkshire Post have both, independently, been investigating the decisions made by the mayor and the development corporation. Senior investigative journalists with considerable experience have been seeking answers to basic questions of openness and probity in relation to the mayor, the development corporation, the joint venture and the local councils. They were absolutely right to do so. What is more, this report confirms their claims.

Unfortunately, this Statement seeks to draw a veil over the very serious conclusions drawn by the independent panel. The starting point is that the Tees Valley project is funded by hundreds of millions of pounds of public money, either from government grant or local prudential borrowing. The investment of public money rightly brings with it higher levels of transparency, challenge and probity.

There are 28 recommendations in the report, and they reveal a damning indictment of the process and procedures adopted by the mayor and the STDC with the joint venture company. The report states that the panel is not confident that

“we have been given access to all relevant materials”,

and that

“we have not been able to pursue all lines of evidence or examine all transactions”.

Anyone reading that will know that the panel is greatly concerned that there is much more to be investigated. My first question to the Minister is whether the panel will be given more time to examine those areas that have yet to be covered, or, as the noble Baroness, Lady Taylor, suggested, whether the NAO will be asked to investigate.

In its own words, the panel focused on just six areas, the main one being the establishment of the joint venture. Initially, this was a 50:50 deal between the public and private sectors, and that is a common arrangement for such schemes. However, the arrangement morphed into a 90:10 split, with the private sector taking the 90%. The report states that

“there is no formal partnership agreement that sets out the obligations of the JV partners, although it is clear that the JV Partners are heavily influential within the operations of the Teesworks site”.

My second question is whether the Minister concurs that there is no such formal agreement. If so, will the Government demand that there is one, and that that agreement will be open to public scrutiny?

One of the curious decisions made by the Teesside mayor and the combined authority is the appointment of two individuals as partners in the joint venture. In my experience, this is highly unusual in publicly funded projects. My third question is therefore whether a joint venture with individuals is in the best interests of transparency.

I turn to my fourth question. Following the report’s statement that the panel were “surprised” that, when the joint venture was set up in 2020, the report doing so

“contains so little detailed explanation and implies that there aren’t any material implications directly arising from this change in approach”,

even though the result of the joint venture was that

“two or three privately owned companies would likely receive significant financial returns”.

This was indeed the outcome. Can the Minister tell the House whether the balance of reward and liability detailed in the report is a fair one, and one which gives best value to public money?

There are myriad questions that require an answer from the Government. My next question concerns the liabilities apparently unknowingly acquired by the local councils and the Tees Valley Combined Authority. The first two recommendations of the report focus on the issue of who makes the gains and who holds the losses. My fifth question is this: does the Minister agree that passing on liabilities to local authorities while local government is in such a parlous financial state is, at the least, poor management, and, at worst, a deliberate ploy to shoulder local authorities with liabilities that are not rightly theirs?

I turn to my sixth and final question. Will the Minister agree to return to the House with a progress report on the implementation of all 28 recommendations, as I note the mayor has accepted these recommendations only “in principle”? Those of us who care deeply about good governance, probity in the use of public money and transparent decision-making want to see these recommendations implemented in full.

[The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Penn) (Con)]

My Lords, I thank both noble Baronesses for their questions. Before I turn to the specific points, it is worth reminding the House of the context of both the review and the work being done in Tees Valley by the development corporation.

Remediating and regenerating the former Redcar steelworks is a highly complex brownfield regeneration opportunity. The alternative is a massive liability to taxpayers in clean-up costs and an annual multimillion pound bill just to maintain a highly contaminated site. Most importantly, as my noble friend Lord Heseltine said in his 2016 report on the Tees Valley, the site is also part of a much bigger picture, which provides an opportunity for regeneration that is unrivalled in size and scale and also in potential opportunity, as we are seeing with development of the freeport in the area.

In June last year, at the request of the Tees Valley mayor, my noble friend Lord Houchen, an extraordinary independent review was launched by my right honourable friend the Secretary of State for Levelling Up, Housing and Communities. That review was commissioned in response to and to consider the serious allegations of corruption and illegality made by a Labour Member of Parliament in the House of Commons. The findings of the review are clear on this point: those allegations are not true. The panel found no evidence of corruption or illegality. In addition, the panel also made a series of recommendations aiming to strengthen governance and increase transparency. We welcome this oversight, as does the mayor, who has confirmed that he intends in principle to accept all the recommendations relevant to him and his authority. There were two recommendations relevant to central government. We will carefully consider how to support the continued success of mayoral development corporations and the recommendation regarding the landfill tax.

The noble Baroness, Lady Pinnock, asked a series of specific questions about the report’s recommendations. It is right that the panel has considered a number of specific issues in the development of its conclusions and recommendations. The next steps are that the Secretary of State has written to the Tees Valley mayor, asking him to respond to the panel’s recommendations within six weeks, and it would not be right at this time for me to comment any further on specific examples quoted. It is important that the combined authority shows progress, and we will wait to see its proposals before deciding on further action. However, I am confident that the mayor will take these recommendations seriously and I look forward to receiving that update. It is only right that we give the mayor, working with partners, time to reflect on the panel’s report. We will review his reflections and response to the Secretary of State before setting out any further action that may be needed.

The noble Baroness, Lady Taylor, asked whether the NAO would now be asked to come in and do a further report in this area. The Secretary of State considered at the time of the review the suggestion that the NAO should undertake this review. However, it is not its role to audit or examine individual local authorities, and its powers would not normally be used for that purpose. Instead, the Secretary of State appointed a panel of three independent local government experts. It would therefore be duplicative and wasteful to commission a second review. The NAO said it would use our review to understand the implications for its other work programmes.

While the origination of the review is unique in that it was a request from the mayor, the form of the review is similar to others commissioned by the department, including in Croydon, Nottingham, Slough and Woking. We are taking a similar approach to other cases in relation to the next steps following the review by asking the mayor to respond to the Secretary of State about how he intends to respond to the review’s recommendations.

The noble Baroness also asked whether people were free to give evidence to the review, and in particular about the use of non-disclosure agreements. The panel chair has confirmed that she is not aware of any party who could not speak to the review or provide information due to a non-disclosure agreement. She is right that in the review it is stated that one former monitoring officer was invited to interview but declined because they felt their professional duties barred them from participating in the review, but that was not the subject of an NDA. Indeed, Tees Valley combined authority confirmed to the panel that it had informed the individual that it had no objection to them participating in the review.

It is also important in that context and in the context of the question from the noble Baroness, Lady Pinnock, about whether the panel had sufficient information to draw conclusions from the review and sufficient time to conduct it, to give the full quote:

“We have however secured sufficient consistent evidence to support our conclusions. We have found no evidence of corruption or illegality. We have identified a need to strengthen governance and increase transparency which can be done with limited impact on pace of delivery”.


The noble Baroness was right that the panel could not follow every lead; none the less, it stated that it had confidence in its findings based on the evidence that it had.

In terms of the timing of the review, I understand that it was totally independent of government; the panel was given sufficient time to conduct the review in the way that it wanted and gather the evidence it felt it needed to draw its conclusions. There was no constraint on the panel in that respect.

Finally, I turn to the questions of private involvement in the redevelopment of the Tees Valley, which is essential, as well as value for money and the public benefit that will come from the regeneration project. It is important to acknowledge that, after SSI’s collapse, the Government took on the responsibility for the site via the receivership process. They spent around £18 million annually just to keep the site secure and manage the worst hazards, including explosion and pollution risks for local populations. The site has required investment to clean up and an important principle of devolution is that decisions are taken locally to benefit local people.

While regeneration is still in its early stages and it is too early to make such an assessment on value for money, the report has identified that a number of benefits have already been achieved, including: 17% of the land already under contract, with a further 40% at heads of terms; 940 construction jobs, plus a further 1,950 recently announced; 2,295 direct and 3,890 indirect jobs created once the sites are operational; 450 acres of land remediated or in remediation; £1.3 billion of business rate income potential over the next 40 years, with a further £1.4 billion at heads of terms; and a new £450 million quay.

So both noble Baronesses are right to say that at the heart of this issue are the people of Teesside and the potential value of that site. The figures I quoted show some of the benefits that we are beginning to derive from this major project. We welcome the scrutiny of the panel, and I place on record our great thanks to the three-strong panel for their thorough work: Angie Ridgwell, the chief executive of Lancashire county council, Richard Paver, previously the first treasurer of the Greater Manchester combined authority, and Quentin Baker, the director of law and governance at Hertfordshire county council.

Tees Valley has a proud industrial history, and the Government are committed to giving it the proudest possible future, putting it front and centre of our mission to level up the country.