Tees Valley's Regeneration Project Ran on Nearly 400 Million Pounds in Loans With No Signed Agreement for Years. The Government Has Now Sent In Inspectors to Ask Why.
Estimated reading time: 7 minutes
.jpg){kind=link}
In short. On 15 October 2026 the Ministry of Housing, Communities and Local Government appointed Laura Shoaf CBE to carry out a statutory Best Value Inspection of Tees Valley Combined Authority, the mayoral body that covers Middlesbrough, Stockton-on-Tees, Redcar and Cleveland, Hartlepool and Darlington [1]. The letter confirming it lists, among the evidence ministers relied on, the authority's own loans to its Teesworks regeneration company and to the airport it owns, both arranged for years without a signed agreement, and an external auditor who has flagged concerns about the authority's finance team and its ability to sign off its accounts on time [2]. The authority's own December 2025 finance papers, read in full, show total borrowing forecast to reach 529 million pounds by the end of the current financial year, most of it borrowed from the government's own lender to fund projects that have not yet paid a penny back [3]. Inspectors report to ministers by March 2027 [1].
Tees Valley Combined Authority is not a council in the ordinary sense. It is the mayoral body that five Teesside councils created in 2017 to run economic growth, transport and devolved funding across the region, chaired by the directly elected Tees Valley Mayor, Ben Houchen [4]. Its flagship project is Teesworks, the redevelopment of the former SSI steelworks site at Redcar, delivered through a separate body the authority itself set up and funds: the South Tees Development Corporation, chaired by the Mayor until June 2026 [5]. The authority also owns Teesside International Airport. Both of those arms-length bodies run on money the combined authority itself borrows and then lends on.
What the inspection letter says it found
The letter appointing the inspector, sent to chief executive Tom Bryant by two MHCLG directors, Sophie Langdale and Frances Oram, sets out the evidence ministers considered before ordering a statutory inspection rather than continuing with the lighter-touch notice already in place [2]. It lists, among other things: a "financial sustainability risk" flagged by the external auditor and the authority's own independent Improvement and Advisory Board, tied to "high level of debt and increasing level of borrowing and interest payments and falling revenue reserves in recent years"; Statutory Recommendations the external auditor issued to the authority on 15 April 2025 and later extended to its three development corporations, covering capacity and capability in the finance team; the auditor's 2024/25 Audit Update Report, published 11 February 2026, which raised the prospect of further statutory powers over delays signing off the 2023/24 and 2024/25 accounts; and "ongoing instability and churn in the senior officer team, including long-term interim appointments to the statutory Section 73 Officer role", the authority's equivalent of a council's chief finance officer [2]. The letter also names, specifically, "information relating to the formalisation of loan arrangements between the Authority and South Tees Development Corporation" as one of the matters ministers weighed [2].
That formalisation is worth pausing on, because the authority's own account of it, published on its website in July, says plainly what was happening before. On 31 July 2026 the authority's Cabinet approved what it called a new financial framework for its lending to the South Tees Development Corporation, covering borrowing within an approved 350 million pound facility, with the authority's own announcement stating that the new framework "will replace historic informal arrangements with documented and enforceable agreements" [6]. Mayor Ben Houchen said the change meant "financial arrangements supporting that regeneration are robust, transparent and provide value for taxpayers", and Middlesbrough Mayor Chris Cooke, the authority's Cabinet Portfolio Holder for Finance, said it would "put in place a clear framework that protects public investment" [6]. Independent assurance for the new framework came from the authority's own treasury advisers, Arlingclose, who modelled repayment under stressed scenarios [6]. What the July announcement does not say, and the authority's own December 2025 finance papers do, is how much money had already gone out the door under the arrangements being replaced.
What the authority's own figures show
The authority's Cabinet papers for 12 December 2025, the most recent quarterly finance report this site has been able to read in full, put a number on it. At the end of September 2025, the authority had lent the South Tees Development Corporation 393.499 million pounds, with a further 6.493 million pounds of outstanding interest accrued on top, and had lent Teesside International Airport 128.119 million pounds, with 26.828 million pounds of outstanding interest [3]. Loans to those two bodies and other group entities totalled 538 million pounds [3]. The report itself flags this as a named financial risk: interest is accruing on the borrowers' side of the ledger, but the authority still has to find the cash to pay interest to the Public Works Loan Board or whichever lender actually advanced the money, whether or not the airport or the development corporation ever pays it [3]. The airport, the papers note separately, "is not currently making the cash payments" on the interest it owes [3].
That on-lending is funded by the authority's own external borrowing, which the same papers put at 398.233 million pounds on 1 April 2025 and 393.749 million pounds at the end of September, with a further 140 million pounds of Public Works Loan Board borrowing needed before the end of the financial year, taking total forecast borrowing to 529.177 million pounds by 31 March 2026 [3]. Against that, the same report forecasts the authority's revenue reserves at 36.357 million pounds by the end of March 2026, and separately records that 24.172 million pounds the authority had counted among its earmarked reserves, for interest accrued on the airport loans, had been wrongly accounted for and was being removed from the figure [3].
The paper trail that got the authority here
None of this starts in October 2026. An independent review commissioned after governance concerns at Teesworks, the Tees Valley Review, reported on 29 January 2024 with 26 recommendations [7]. Fourteen months later, on 3 April 2025, the department issued the authority with a non-statutory Best Value Notice, the formal step below an inspection, citing continuing concern about the authority's capacity to comply with its Best Value Duty and pointing to the same external auditor's reports already identifying "significant weaknesses in value for money arrangements across financial sustainability, governance and improving economy, effectiveness and efficiency" for 2021/22 and 2022/23, extending into capacity problems in the finance and risk teams by 2023/24 [7]. Interim chief executive Tom Bryant responded at the time that the authority "fully accept[ed] the Best Value Notice and are committed to demonstrating meaningful and sustained improvement" [8]. The notice was due a formal 12-month review; instead of lifting it or leaving it in place, ministers escalated.
The inspection the department has now ordered covers specific ground, set out in directions to the lead inspector: governance and decision-making across the authority and its entities; the strength of audit arrangements under section 151 of the Local Government Act 1972, including those relating to on-lending; what an appropriate level of capital risk would be for the authority; the effectiveness of its plans to manage its debt levels; leadership capacity and capability; and whether the authority is actually implementing the 2024 review's recommendations rather than simply reporting that it is [1]. Announcing the appointment to Parliament, local government minister Jim McMahon said the government wanted to empower local leaders, "but stronger local leadership must be matched by strong local institutions. As powers and investment increase, so too does the responsibility to demonstrate strong governance, sound financial management, transparent decision-making and effective stewardship of public resources" [4].
What the authority says
The authority's response, given to the trade title Local Government Chronicle on the day of the announcement, did not dispute the facts behind it. "We welcome the appointment of Laura Shoaf and her fellow inspectors and will work openly and constructively with them and we're pleased the government are committing the appropriate resource and people to bring this process to a conclusion," a spokesperson said, adding: "We have always been clear that we welcome scrutiny and constructive challenge. There is more work to do, and we will continue to make improvements wherever they are needed" [9].
What is still open
A Best Value Inspection is not, on its own, a statutory intervention. Unlike the Directions ministers have proposed for Bedford and extended for Slough, both covered on this site this month, nobody is yet being told to accept government commissioners [10] [11]. Laura Shoaf's inspection is a fact-finding power: she can demand any document or access any premises she judges necessary, and the authority must preserve all records from the date of her appointment, but her job is to report, not to act [1]. What happens next depends on what she finds between now and March 2027, including whether the loan framework agreed in July actually gets the development corporation's money back on the schedule Arlingclose modelled, and whether the authority's own forecast of falling reserves and rising debt turns out to have been accurate. This site will read that report when it lands.
Sources
- Jim McMahon OBE MP, Minister for Local Government, Devolution and Regional Growth, letter to Lord Houchen, Mayor of Tees Valley, Ministry of Housing, Communities and Local Government (15 October 2026). https://assets.publishing.service.gov.uk/media/6ad0c752a89985bb97026728/Letter_from_the_Minister_for_Local_Government_Devolution_and_Regional_Growth_to_the_Mayor_of_Tees_Valley.pdf
- Sophie Langdale and Frances Oram, Directors, Local Government Reform and Strategy, letter to Tom Bryant, Chief Executive of Tees Valley Combined Authority, Ministry of Housing, Communities and Local Government (15 October 2026). https://assets.publishing.service.gov.uk/media/6ad0c66467af5c09d0479647/Letter_from_the_Directors_of_Local_Government_Reform_and_Strategy_to_the_Chief_Executive_of_Tees_Valley_Combined_Authority.pdf
- Tees Valley Combined Authority, Cabinet Agenda Papers, including the Quarter 2 Forecast Revenue and Capital Outturn 2025/26 report (12 December 2025). https://democracy.teesvalley-ca.gov.uk/about/wp-content/uploads/sites/2/2025/12/TVCA-Cabinet-Agenda-Papers-12-December-2025.pdf
- Ministry of Housing, Communities and Local Government, "Best Value Inspection confirmed at Tees Valley Combined Authority", GOV.UK (15 October 2026). https://www.gov.uk/government/news/best-value-inspection-confirmed-at-tees-valley-combined-authority
- North East Bylines, Peter Morris, "Bad Debts Bring £140mn Chaos to Tees Valley Budget" (15 December 2025). https://northeastbylines.co.uk/business/bad-debts-bring-140mn-chaos-to-tees-valley-budget/
- Tees Valley Combined Authority, "Loan Agreement Approved to Support Teesworks Regeneration" (31 July 2026). https://teesvalley-ca.gov.uk/news/loan-agreement-approved-to-support-teesworks-regeneration/
- James Blythe, Deputy Director, Local Government Stewardship and Interventions, "Tees Valley Combined Authority best value notice issued on 3 April 2025", Ministry of Housing, Communities and Local Government. https://assets.publishing.service.gov.uk/media/67ee45ee53fa8521c3248c30/Tees_Valley_Combined_Authority_-_Best_Value_Notice.pdf
- Tees Valley Combined Authority, "Combined Authority Highlights Latest Efforts to Address Best Value Notice" (6 June 2025). https://teesvalley-ca.gov.uk/news/combined-authority-highlights-latest-efforts-to-address-best-value-notice/
- Local Government Chronicle, Kirsty Weakley, "MHCLG orders best value inspection for Tees Valley" (15 October 2026). https://www.lgcplus.com/politics/governance-and-structure/mhclg-orders-best-value-inspection-for-tees-valley-15-10-2026/
- Civic Scrutiny, "Inspectors Found Bullying, Misogyny and a Budget That Does Not Add Up at Bedford Council. The Government's Fix Is Three Years of Commissioners." (23 October 2026). https://www.civic-scrutiny.co.uk/2026-updates/bedford-borough-council-best-value-intervention.html
- Civic Scrutiny, "Slough Council's Five Years Under Government Control Were Due to End Next Month. Ministers Have Just Proposed Three More Years of It." (22 October 2026). https://www.civic-scrutiny.co.uk/2026-updates/slough-council-intervention-extended-2029.html