An inquiry is being launched into allegations of corruption related to a flagship Tory government project – the free port at Teesside.
Levelling-Up Secretary Michael Gove has ordered it, but turned down an offer by the National Audit Office to carry it out. Apparently it doesn’t fall within the NAO’s remit.
Instead, he said he would ask an independent panel to report on the governance arrangements, how decisions are made, and look “at the value achieved for the investment of public money on the site”.
Concerns relate to the transfer of millions of pounds worth of public assets (land in this case) to private developers.
The situation has been covered in recent issues of Private Eye, which alleges that more than £100 million worth of land was sold to a company controlled by local businessmen for £100.
Apparently a firm called Teesworks Ltd was created as a joint venture between their companies and the publicly-owned South Tees Development Corporation (STDC).
Teesworks Ltd would be able to commission income on the development, take half the proceeds of scrap sales from the abandoned steel industry in the area (in the high tens of millions of pounds so far, allegedly), and have an option to buy any land, once redeveloped – at public expense – for market value.
This deal involved no payment or investment from the private sector partners, and was made after they had made what the Eye calls a “well-timed” purchase of a separate option on a small area of land that “the official version goes”, could have stopped the compulsory purchase from a Thai steel company’s bankers of land on the South Tees.
A report on a meeting that approved a compromise deal with the Thai banks suggested to Eye reporters that the STDC board is a “rubber stamp” for privately-made decisions.
The local businessmen later increased their stake in Teesworks Ltd to 90 per cent – at a cost of £0, and the option deal was amended so the company could acquire land for just £1 per acre – leading to the purchase of land worth £100 million for just £100, stated the Eye.
Documentation stated that the extra shares were in return for Teesworks taking on the the future development of the site and liability for preparing the land for tenants, at a cost of £172 million, after public funding ran out – but nothing has so far been invested (again, according to the Eye).
Indeed, it seems that, just as public money was about to run out, Tees Valley Mayor Ben Houchen changed the deal so that STDC will continue funding the operation – with public borrowing.
The magazine stated: “The valuation of the shares was said to have been based on the value of the option, the scrap proceeds and the (negative) land value given the work supposedly to be – but in the event not – funded by Teesworks Ltd.
“This valuation was prepared by estate agents Knight Frank, whose local partners happen to include” the sister of one of the owners of Teesworks Ltd. Both STDC and Knight Frank declined to say if this sister had been personally involved in the work.
As for the change to the option that allowed “the vast transfer of wealth from the taxpayer into private hands”, STDC’s 2021/22 accounts state that “an option exists, allowing the purchase of areas of the Teesworks site for a value which is equal to a value determined by an independent valuer”.
The Eye concluded that “since the actual price for any purchase had for some time been £1/acre and way below the true value of the land… this is either false or indicates that… Knight Frank… decided all remediated land would be worth the nominal figure anyway”. Either way, the Eye concluded that the statement in the accounts “concealed the secret squirrelling under way”.
Given these allegations – and we need to bear in mind that they are only allegations at the moment – one might wonder why the “independent” inquiry is only examining what the governance arrangements are, the way decisions are made, and the value achieved in return for public investment.
The “independent” panel isn’t being asked to examine possible corruption in those decisions.
And that’s odd, because it seems investors are becoming nervous: BP and a Norwegian firm, Equinor, have suddenly insisted on a guarantee that no assets have been subject to an “unacceptable act”, and that STDC and its partners must confirm that they have not and will not “hide or dissimulate the nature, origin, location, disposition or ownership of assets, rights or values”.
It is also curious that the man in charge of the Teesside Freeport quit his job on the day the inquiry was announced.
Nolan Gray is to take up another appointment outside Tees Valley Combined Authority. He told The Northern Echo he had achieved his main goal of setting up and launching the freeport.
That’s odd. I’ve just seen a UK government press release from 2021 saying the freeport was up and running. Presumably his goal was achieved all that time ago. I wonder why he waited so long.
Put all this together, and it seems unlikely that Gove’s inquiry will provide any answers to the questions that are being asked.