Teesowork: No police investigation as Houchen is defending the process

Last month, Middlesbrough Labor MP Andy McDonald alleged “corruption on an industrial scale” in Freeport. In response, a Teesworks spokesman urged him to report it to police if he believed any crime had occurred.

A spokesman for the force has now confirmed that no complaints have been received and no investigations have been or are ongoing against Teesworks, the South Tees Development Corporation (STDC), the Tees Valley Combined Authority (TVCA) and Tees Valley Mayor Ben Houchen or developers Martin Corney and Chris Musgrave.

The Local Democracy Reporting Service also asked the Serious Fraud Office whether an investigation was ongoing, but as is normal practice, this was neither confirmed nor denied.

Leveling Up Secretary Dehenna Davison also responded on behalf of the Government this week to Mr McDonald after he requested a meeting to discuss his concerns. She said they saw “no evidence of corruption, wrongdoing or illegality.”

Answering questions from the Prime Minister, Conservative MP Simon Clarke of Middlesbrough South and East Cleveland claimed Mr McDonald made a “shameful attempt” to “slander” the free port scheme. Mr McDonald said the Tories were “utterly ridiculous” to blame Labor and had to accept that there were “very serious and legitimate concerns”.

Ms Davison, Mr Clarke and Mr Houchen all received donations (declared at the time) in 2019 from Ian Waller, a director at Northern Land Management Ltd, which holds a 25 per cent stake in Teesworks Ltd.

This week Lisa Nandy, Labor secretary for Shadow Leveling Up, wrote to National Audit Office chief Gareth Davies, calling for a full investigation into Teesworks. Later that same day, Mr Houchen wrote to Mr Davies and Leveling Up Secretary Michael Gove to also request a review.

Ms Nandy has since sent another letter to Mr Gove after concerns that an inquiry was outside the purview of the NAO as it claimed it could not examine the decisions or actions of either the TVCA or the STDC. The Labor MP asked if Mr Gove could check whether the legislation would allow the NAO to carry out an inquiry without restrictions if he agreed and whether he had the power to treat this as an exceptional case and open a state inquiry.

On Wednesday night, Mr Houchen did not directly answer BBC Newsnight’s question about how much private developers had spent on the freeport. Mr. Musgrave and Mr. Corney’s companies own 90 percent of Teesworks.

Mr Houchen said they are currently liable for a £107million loan and £20million to £50million of redevelopment work for the Net Zero Teesside Power site. This is a joint venture between BP and Equinor with the aim of becoming the UK’s first fully integrated commercial gas fired power station with carbon capture.

Mr. Houchen added that this was a “simplified view” when asked if it was correct that the developers hadn’t invested yet. The developers are believed to have received around £45m in dividends from the project so far.

Concerns about Teesworks were raised after a share transfer resulted in companies owned by Mr Corney and Mr Musgrave – JC Musgrave Capital, Northern Land Management Ltd and DCS Industrial Limited – increasing their stake in Teesworks Ltd from 50% to 90%, it said that STDC owned only 10 percent instead of 50 percent as before.

At the time, Stockton North MP Alex Cunningham said there was “shady business” in the area, but Mr Houchen said the deal had relieved the taxpayer of liability for the site and allowed the freeport to invest hundreds of millions of pounds in private secure cash.

An estimate consulted by the Local Democracy Reporting Service puts the cost of rehabilitating the site, excluding the 90 hectare SeAH site, at £482.6m and the whole site has been given a face value of £1.

The original goal was to create 20,000 jobs at Teesworks over a period of 25 years. Public funds were used to rehabilitate some parts of the site and the investors’ money was then reinvested in the remediation of the next plot.

However, Mr Houchen has previously said that redevelopment work would need to be accelerated so investors could benefit from time-limited free port tax breaks, which will be reviewed in 2026. This is the argument for moving to a 90/10 stock split private investment could be brought in faster.

Currently, Teesworks Ltd is eligible to purchase land on the site at £1 per acre. STDC borrows money to rehabilitate land and Teesworks Ltd then pays it back with interest. Unless it repays the STDC, it cannot acquire the land.

Teesworks Ltd is also entitled to half of the scrap revenue from the site. According to the latest figures, the amount of scrap totaled 93 million pounds.

Mr Corney and Mr Musgrave did not participate at all in any public tender process to acquire any interest in Teesworks (or when the interest was increased to 90 per cent). However, Mr. Houchen said the project would not have happened without the developers.

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

When it became clear that the negotiations, which included delegation trips between the UK and Thailand, would not result in an agreement, the STDC applied for a compulsory purchase order (CPO) to take over the site. However, Mr Houchen said it was clear they would lose, whereupon Mr Musgrave and Mr Corney arrived at the last second and offered a deal, according to the mayor.

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