The Tees Valley Combined Authority (TVCA) is to face a new assessment by government-appointed inspectors after a minister announced he has "material concerns" about the authority's "long-term financial sustainability".
Jim McMahon, Minister for Local Government, Devolution and Regional Growth, also expressed remaining concerns about strong leadership, governance and financial management, and the scale of work to deliver improvements. He said: "I consider there are signs of potential Best Value failure."
Background to the inspection
The government had previously demanded improvements of the Teesside authority, headed by Conservative Tees Valley Mayor Ben Houchen, under a Best Value Notice for the last 18 months. This followed the 2024 Tees Valley Review independent investigation into Teesworks, which criticised governance, decisions, transparency and finance, though it found no evidence to support allegations of corruption or illegality, and made 28 recommendations.
A Best Value Notice is a formal notification of concerns about governance and value for money. TVCA said it was striving to become an "exemplar combined authority" making "continuous improvement and excellence" as an organisational improvement plan was implemented.
The original notice, "seeking further assurance of improvement" with expectations on governance, culture, partnerships and action to tackle the 2024 review's recommendations, has been in place since April 2025. In April this year the government confirmed it remained in place.
Minister's concerns
Now, Mr McMahon has announced an inspection of the authority's "compliance with its best value duty". The government has appointed Laura Shoaf CBE as lead inspector, with three assistant inspectors to be appointed shortly.
Mr McMahon said his department had worked closely with the authority and its independent improvement and advisory board to scrutinise progress on the notice and the authority's organisational improvement plan, commending officers' work to support improvement. He explained: "I recognise the complexity of unpicking historic governance and accounting issues, and that as improvement work has progressed, further matters requiring attention have been identified.
"However, despite sustained improvement efforts, I am not yet assured that the authority has the capacity, capability or appropriate arrangements in place to respond with sufficient pace, transparency or consistency to the level of remaining risk. In particular, I have material concerns about the authority's long-term financial sustainability, given its high levels of debt, increasing borrowing and interest costs, and declining revenue reserves in recent years.
"I welcome the authority's recent agreement of formal loan repayment arrangements with South Tees Development Corporation, including changes to strengthen cabinet oversight. However, those steps do not in themselves provide assurance on the assumptions underpinning the repayment arrangements or the management of associated financial risks, on which I would like direct, independent assurance. More fundamentally, the effectiveness of these arrangements ultimately depends on strong leadership, governance and financial management, where broader concerns remain."
Mr McMahon noted the external auditor's consideration of using its powers responding to concerns about the authority's governance and control environment and delays in completing and signing off financial statements for 2023-24 and 2024-25. And he said governance and assurance improvements were in train.
But he added: "I remain concerned about the scale of work outstanding to deliver and embed those improvements, and evidence their impact. Having considered all available evidence to date, including from the authority, its independent advisory board and the external auditor, I consider there are signs of potential best value failure."
Scope of the inspection
The inspection will provide an evidence-based assessment of the authority's compliance with its best value duty, focusing on, but not limited to, governance and decision-making across the authority; use of resources and audit and accounting arrangements; capacity and capability at leadership level and across the organisation; the adequacy of the authority's plans and capacity to deliver its organisational excellence strategy; and how these functions and arrangements are impacting organisational culture, partnerships and community engagement, and service delivery.
"Given the scale and complexity of the authority's commercial and regeneration activities, I would welcome expert assurance that appropriate arrangements are in place to oversee and mitigate the associated risks."
Mr McMahon said the new model of government rested on strong and capable strategic and local authorities: "Acting to ensure that strategic authorities have the right accountability, capacity and capability that protects residents and public money, reinforces public confidence and provides a secure foundation for devolution's resilience.
"Further devolution will be rolled out as quickly as possible and additional powers and control... will be available to Tees Valley Combined Authority as with all mayoral strategic authorities, benefitting the people of the Tees Valley. Further detail on the approach, including any phasing, will be set out in the delivery plan this autumn."
MPs' response
A statement from six North East Labour MPs said the inspection's findings were due by March next year: "The Tees Valley Mayoral Combined Authority (TVCA) is now facing a formal Best Value Inspection, an escalation of the Best Value Notice issued by the Government in April 2025. This follows the 2023-24 independent review, which found that arrangements at TVCA 'do not include the expected sufficiency of transparency and oversight across the system to evidence value for money'."
It added: "Their findings are due by March 2027. These are serious questions about governance, financial management and the use of public money.
"The inspection must be allowed to establish the facts, and we will give it our full support. The Tees Valley is a region of major opportunity, with significant new investment coming in to create jobs and drive economic growth.
"Every week, we are speaking to investors and our government about the enormous potential our region has. The government has recognised Teesside's 'unique potential' for new industries, and in recent months, we have already seen the confidence this government has in Teesside with the billions committed to projects in carbon capture and storage, sustainable aviation fuel, and other industries.
"Strong local governance at TVCA is essential to sustaining this progress and building a stronger future for our region. Ben Houchen should welcome this scrutiny. Every politician should be prepared to answer for decisions made on their watch. It is your money. You deserve answers."
The statement is from Anna Turley for Redcar and Cleveland, Andy McDonald for Middlesbrough & Thornaby East, Chris McDonald for Stockton North, Jonathan Brash for Hartlepool, Luke Myer for Middlesbrough South & East Cleveland and Lola McEvoy for Darlington.
TVCA response
A spokesperson for the TVCA said: "We welcome the appointment of Laura Shoaf CBE 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. This is an opportunity to demonstrate the progress that has been made, while continuing to strengthen the organisation and ensure it delivers effectively for people and businesses across the Tees Valley.
"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."
