Teesworks Joint Venture

Baroness Taylor of Stevenage 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.

--- Later in debate ---

[Baroness Penn (Con)]

My Lords, the Audit Commission regulated, micro-managed and inspected local councils, forcing them to spend time ticking boxes and filling in forms rather than getting on with the business of local government. It hindered transparency and scrutiny. Local government can put in its own systems of local authority financial reporting and audit to ensure that it is accountable for spending public money effectively.

With regard to transparency functions, there is Oflog—the new data-driven organisation that will provide transparent and authoritative sources of information for the performance of local government. This will, however, be vastly different to how the Audit Commission operated, which imposed compliance requirements on local authorities and conducted routine inspections.

[Baroness Taylor of Stevenage (Lab)]

I have not heard anyone advocating for the Audit Commission; what we have been saying is that, since the Audit Commission went, the private sector auditors who have been appointed have struggled to deal with the complexities of joint venture auditing. That is the issue. With that in mind, will the Minister reflect on the quite exceptional circumstances of this case and whether it might justify a more detailed audit review by the National Audit Office? Has she had a response to the request from the noble Baroness, Lady Pinnock, that we hear back once the mayor has had a chance to consider his response to the 28 recommendations in the review?

[Baroness Penn (Con)]

I am afraid that I will have to disappoint the noble Baroness on her first question. We will not be referring this matter to the NAO. However, as I said in my initial response, the NAO has said that it will reflect on the findings of the review for its own programme of work. Of course, when the Government receive their response from the mayor and partners, we will reflect on what that means for next steps and will make sure that the House is kept up to date on what they are.