The Tees Valley Mayor has publicly called for an investigation into Teesworks

Ben Houchen, the Tees Valley Mayor has publicly called for an investigation into Teesworks after Labour demanded an inquiry.

On Tuesday, Labour’s Shadow Levelling Up Secretary Lisa Nandy wrote to the head of the National Audit Office (NAO) Gareth Davies to ask the public spending watchdog to look into the freeport. Now, Conservative Ben Houchen has called for the same, claiming he wants to nip allegations in the bud “once and for all”.

Last month Middlesbrough MP Andy McDonald alleged “industrial-scale corruption” at the site. In response, a Teesworks spokesperson said the Labour MP’s comments were driven by “vengeance” and “mischief”.

Ms Nandy said: “The government has handed over hundreds of millions of pounds of taxpayers’ money to a project that is now 90% in private ownership, while the private owners appear not to have put in a penny and pocketed millions.

“There seems to have been no scrutiny or basic oversight from Ministers. Instead, they’ve simply signed off on this deal and walked away. There must be a comprehensive, independent investigation to ensure the public interest is protected.”

So far, the government has invested more than £246m of taxpayers’ cash into the project and provided a £107m loan to build the new quay.

When the Local Democracy Reporting Service (LDRS) asked on Monday if an investigation was imminent, a spokesperson for the NAO said it has “no remit in relation to the actions or decisions” of the Tees Valley Combined Authority (TVCA) or the South Tees Development Corporation (STDC). However, if central government funding was to continue into 2023 it is “likely to make further enquiries following our usual processes.”

A spokesperson added: “This will involve liaising with relevant government departments and seeking to review relevant documents. No decision on whether to conduct a more detailed audit will be taken until these initial steps are complete.”

Now, Mr Houchen has written to Department for Levelling Up, Housing and Communities Secretary of State Michael Gove and NAO chief Mr Davies. He claims he had already contacted the government “a number of weeks ago” about whether an independent review by the NAO could be carried out, but was told it was outside of its remit.

On Tuesday, he asked, given the cross-party nature of the request, whether an exception could be made.

In a statement, he added: “Ever since the claims were made in Parliament, we’ve been constantly reassuring our investors, as well as those bringing the claims and the local people of Teesside that we are doing everything that is appropriate and expected of a public body. I want this nipped in the bud once and for all.”

Teesworks partner Chris Musgrave said “we have absolutely nothing to hide” and that he looks forward to an investigation.

The mayor has previously said assurances had to be given to BP and Equinor, who are investors in Teesworks, and it is understood that clauses were added into commercial contracts which confirmed that the site’s assets had not been acquired due to an “unacceptable act”.

The NAO has previously carried out some enquiries into government funding at Teesworks. It looked into the memorandum of understanding, business case, and quarterly monitoring reports at the Teesworks site. Officials found the reports showed government funding had been used as intended.

At the time, TVCA officials claimed the NAO had given Teesworks a “full clean bill of health”. However, NAO officials denied the body had undertaken a review or audit of the TVCA, the STDC, or Teesworks and later contacted the combined authority asking for the comments to be corrected.

Concerns have been raised by Labour MPs after shares changed hands at the end of 2021. As reported by the LDRS at the start of 2022, companies owned by Martin Corney and Mr Musgrave – JC Musgrave Capital, Northern Land Management Ltd, and DCS Industrial Limited – increased their Teesworks Ltd shares from 50% to 90%.

This left the STDC with 10%, rather than the 50% it had held before.

At the time, Stockton North MP Alex Cunningham said the area was “seeing waste and dodgy deals on a concerning and escalating scale”. However, Mr Houchen said the deal removed the liabilities for the site from the taxpayer and allowed the freeport to secure private cash running into the hundreds of millions of pounds.

A valuation seen by the LDRS puts the cost of remediating the site, excluding the 90-acre SeAH plot, at £482.6m and a nominal value of £1 was placed on the entire site.

Currently, Teesworks Ltd is entitled to buy land at the site for £1 an acre. The STDC borrows money to remediate plots and then Teesworks Ltd pays it back with interest. If it does not pay back the STDC, it will not be able to acquire the land.

Teesworks Ltd is also eligible for half of the income of the scrap from the site. The most recent figure suggests the scrap amount has totalled £93m.

Mr Corney and Mr Musgrave did not take part in a public tender process to acquire shares in Teesworks in the first place (or when the shares were increased to 90%), however, Mr Houchen has said without the developers the scheme would not have happened.

After Redcar Steelworks went into liquidation, the STDC tried to buy the site. However, it had to negotiate with Sahaviriya Steel Industries (SSI) and three Thai banks, as the banks were owed around £800m because they held the former steelworks site.

When it became clear that negotiations, which included delegations flying back and forth between the UK and Thailand, were not going to result in a deal the STDC applied for a compulsory purchase order (CPO) to take over the site. However, Mr Houchen said it was clear they were going to lose which is when Mr Musgrave and Mr Corney swept in at the eleventh hour to offer a deal, according to the mayor.

This came after their company DCS Industrial Limited signed a three-year lease for a 70-acre site on the Redcar Bulk Terminal (RBT). The SSI agreed to stop trying to block the CPO, in return for the RBT site. For brokering this deal, Mr Corney and Mr Musgrave were brought in as development partners on the Teesworks scheme.