Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Lord Ben Houchen’s Teesworks regeneration project should be investigated by the National Audit Office for not meeting public value-for-money standards, according to an internal Whitehall recommendation to deputy prime minister Angela Rayner.
People familiar with the government’s thinking said a recommendation for parliament’s spending watchdog to step in was made to Rayner before Christmas.
Houchen has presided over the huge Teesworks project in Redcar since 2017. The scheme is intended to transform the former SSI steelworks, the UK’s largest brownfield site, into a major energy hub featuring investors including BP and Equinor.
Three people familiar with the government’s thinking said ministers had been frustrated with progress at the bodies overseen by Houchen, the South Tees Development Corporation (STDC) and its parent organisation the Tees Valley Combined Authority (TVCA).
They said that Whitehall figures now believed “best value” had not been achieved on the project and that it therefore met the threshold for the NAO to investigate.
The TVCA said the government had provided no update on its intentions, but noted that the NAO had no automatic remit over local bodies.
Under normal circumstances, the NAO does not look into organisations outside of central government’s direct control. In order to carry out a full inquiry into Teesworks, the Ministry of Housing, Communities and Local Government would therefore need agreement from Houchen, the UK’s only Conservative metro mayor, for a probe to go ahead.
The news comes after the latest accounts showed the private sector partners in the Teesworks scheme received an increased payout from dividends and fees totalling at least £26.4mn in the last financial year despite an 85 per cent fall in revenues.
The publicly funded regeneration of the land, which is overseen by the Houchen-chaired STDC and has so far received £560mn in grants, has drawn sustained criticism.
In particular, the 2021 decision to hand 90 per cent of its Teesworks Ltd development vehicle to two local developers — including the right to purchase parcels of land for £1 an acre — sparked concerns that the private partners were making millions from public assets.
Last year, the Conservative government launched an independent inquiry into the project’s finances and governance after accusations of corruption were made by Labour. It found no evidence of corruption but warned that value-for-money safeguards were not sufficiently robust.
The latest accounts for Teesworks Ltd show turnover fell from £142.9mn to £22.2mn in the year to March 2024.
Director Martin Corney, one of the private developers, put this down to “delayed investment decisions” by investors, “principally” due to geopolitical events. He also pointed to the impact of the inquiry itself and the uncertainty caused by last year’s general election.
During the same period, the developers benefited from at least 90 per cent of a £20.25mn dividend, while a separate company owned by the developers received £8.4mn in consultancy fees.
Taken together, the payout totalled at least £26.4mn compared with £25mn the previous year.
The independent inquiry into Teesworks in January last year warned there was “no evidence” the private partners had yet invested and recommended that the project’s core public-private deal be renegotiated. That prompted Labour to promise, while in opposition, to trigger a NAO investigation if it won the election.
It is unclear from the latest accounts whether the two developers, Corney and Chris Musgrave, invested in the site in the year to March 2024. They declined to comment.
Since Labour’s election victory in July, ministers have been considering Houchen’s own detailed proposals for improving the project’s governance. So far, they have remained tight-lipped about the next steps.
The housing ministry said it was right to consider the Tees Valley mayor’s plans in detail “before determining if further action should be taken”.
Houchen, who has always insisted the project is good value and will create thousands of jobs, said in 2023 that he would welcome such a move.
But more recently he has argued that an NAO probe would represent a waste of time and resources, given that one independent government review has already been carried out.
The NAO said if a minister requested an investigation and had agreement from the body in question, NAO boss Gareth Davies would “ask the department to set out the reasons for him to consider using the NAO’s resources to carry out an investigation”.
