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A government review into the controversial regeneration project of Teesworks, the UK’s largest freeport, found no evidence of corruption but said there were insufficient guardrails to ensure value for money for taxpayers.
The redevelopment of the former Redcar steelworks is a flagship project of Conservative mayor Lord Ben Houchen and has come under scrutiny after ownership of much of the project was transferred to two local developers.
An independent government-appointed panel concluded on Monday that there were insufficient governance arrangements or transparency to demonstrate that taxpayers who funded the redevelopment were getting value for money.
But the review, ordered by Secretary Michael Gove, found no evidence of corruption or illegality in the redevelopment.
“There are governance and transparency issues that need to be addressed and a number of decisions taken by the bodies involved do not meet the standards expected in the management of public funds,” the 96-page report reads.
Teesworks has become increasingly controversial over the past 18 months as concerns were raised over the role of two local developers, Chris Musgrave and Martin Corney.
In 2021, the South Tees Development Corporation, the public authority chaired by Houchen, handed over 90% ownership of the Teesworks development vehicle to developers without any cash consideration.
The vehicle Teesworks Ltd’s most recent accounts show its profits tripled to £53 million in the following financial year.
The report notes that, to date, the project has cost taxpayers more than £560m, but that “no private funding has been invested”. The private developer partners were also found to have received £45m in direct dividends.
Last year Middlesbrough MP Andy McDonald claimed there had been “corruption on an industrial scale” at Teesworks. The commission found “no evidence” to support these claims.
However, it concluded there had been “no independent scrutiny” of the project and said there had been a “lack of challenge” from the STDC board, which includes cabinet minister Jacob Young, the Tory MP for Redcar.
The review, chaired by Lancashire County Council’s chief executive, Angie Ridgwell, also found that conflicts of interest between public body officials tasked with overseeing Teesworks were not routinely recorded.
All but one of the transactions analyzed by the panel were decided without “detailed commercial finance advice”, the report said.
The analysis adds that the Tees Valley Combined Authority, the body of five local authorities part-funding the project, appears to be unaware of the extent of the liabilities it faces.
Both STDC and TVCA, also chaired by Houchen, “do not include sufficient expected transparency and oversight across the system to demonstrate value for money,” he added.
Gove has written to Houchen asking for details of how he intends to deal with the review findings by 8 March.
In a statement, Houchen welcomed the report, calling it “thorough, broad and detailed.”
His team is working to review its recommendations and “improve our processes and procedures in line with the report’s findings,” he said, adding that McDonald’s had attempted to “sabotage the opportunities we’ve worked hard to deliver.”
The National Audit Office, which assesses the value for money of public projects nationwide but was not asked to review the project last year, said: “We will look at the details of the Government’s review to understand whether there are implications for the central government system and therefore the future work program of the NAO.”
Teesworks Ltd said it was “satisfied but not surprised” that no evidence of corruption or criminality had been found.
The findings of the review will “send a clear signal to the business sector”, they said, adding that the project is now “full steam ahead”.