An inquiry has found no evidence of “corruption or illegality” at the Teesworks site in the North East of England – but has raised concerns over “transparency and oversight.
The development of the former Redcar Steelworks began in 2015 and has seen the area transformed into a large industrial site, with plans to turn it into a freeport to create a tax-free zone for shipping.
Tees Valley Conservative mayor Lord Ben Houchen claimed it had raised £2bn of private sector investment and created almost 3,000 jobs.
But the government ordered an independent inquiry into the site after claims private companies – which now own the 90% of the project – had profited to the detriment of the taxpayer.
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Releasing its report on Monday, the inquiry said it had found “no evidence to support allegations of corruption or illegality”.
However, its report added: “There are issues of governance and transparency that need to be addressed and a number of decisions taken by the bodies involved do not meet the standards expected when managing public funds.”
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The site has been pointed to as a “levelling up” success for the government, and made Lord Houchen a well-known figure within the Tories.
But a report by the Financial Times claimed Teesworks Ltd – a company set up by the South Tees Development Corporation, which is chaired by the mayor, to run the project – had handed over 90% of its shares to local business people for free and without a tender process, despite hundreds of millions of taxpayer cash being pumped into the project.
Labour claimed there has been “a worrying lack of effective safeguards to ensure value for money for taxpayers” throughout the project, and attacked Lord Houchen for the part he had played.
And Middlesbrough MP Andy McDonald made allegations in the Commons of “truly shocking, industrial-scale corruption”.
But the Tory mayor accused the party of “smearing [an] incredible project” that has been “delivered by the Conservative Party in a traditional Labour heartland”.
While the inquiry rejected Mr McDonald’s allegations, they did conclude “the systems of governance and finance in place within TVCA [the Tees Valley Combined Authority] and STDC [the South Tees Development Corporation] at present do not include the expected sufficiency of transparency and oversight across the system to evidence value for money”.
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Responding to the report, Lord Houchen said it “sets out in black and white that there is no corruption or illegality at Teesworks”.
He added: “Without this partnership, the former steelworks would still be sat idle, costing the taxpayer £20m a year to stand still, with no investment and not a single job in sight.”
The mayor also said he would “review the recommendations to improve our processes and procedures in line with the report’s findings”.
But Labour’s deputy leader Angela Rayner said the report gave “a scathing assessment of Conservative mayor Ben Houchen’s mismanagement and bad governance at Teesworks”, and “many questions remain”.
She called on the government to refer the project to the National Audit Office (NAO).
A spokesperson for the NAO said: “We will examine the detail of the government’s review to understand whether there are implications for central government and therefore the NAO’s future work programme.”
