Redcar Steelworks

Wednesday 17th May 2023 Lords Chamber

Private Notice Question

15:47

Asked by

[Lord Scriven]

To ask His Majesty’s Government what assessment they have made of allegations of corruption related to the redevelopment of the Redcar Steelworks site in Teesside.

[The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)]

My Lords, the department has seen no evidence of corruption, wrongdoing or illegality within the South Tees Development Corporation. The mayor and the combined authority are working tirelessly to level up the area of Teesside, including supporting economic growth and high-quality job creation. Private sector investment and a joint venture were always a core part of the business case for this site, and the National Audit Office review in 2022 found that government funding had been used as intended.

[Lord Scriven (LD)]

My Lords, everybody wants to see regeneration in Teesside, but the National Audit Office has not conducted an audit, just a light-touch review. The last full public audit was carried out 18 months ago, since when reports in the press, including the Yorkshire Post, have indicated the potential risk to hundreds of millions of pounds of taxpayers’ money, with superprofiteering to a monopoly private company. The Tees Valley Mayor yesterday said he has no objection to the National Audit Office carrying out a full audit. That has to be at the instigation of the Government, so what is stopping the Government agreeing to implement Section 6(3)(d) of the National Audit Act allowing a full National Audit Office audit to investigate that taxpayers are not being short-changed by excessive profits going to one private company?

[Baroness Scott of Bybrook (Con)]

My Lords, the noble Lord is correct; the Mayor of Tees Valley has written to the Secretary of State, giving his full support for an independent review. The department will reply to him shortly. As a Government, we will continue, as we have right the way through this scheme, to monitor the spend and delivery on-site. We will do that for two years after public spending on the site. The Tees Valley Combined Authority has also judged that the joint venture presented value for money. Independent auditors of the STDC’s accounts have not raised any concerns around that judgment or the management of that organisation.

[Baroness Taylor of Stevenage (Lab)]

My Lords, it is vital that the public, particularly the public of Teesside, get answers to the very serious questions about the transfer of this key public asset into private ownership, with the potential losses that may have been incurred to the public purse. That is why my honourable friend the shadow Secretary of State has written to the National Audit Office to call for a full inquiry. Ministers and civil servants seem to have had little or no knowledge about what was going on in Teesside, and the whole process was entirely opaque.

It was originally intended that public funding would be used to clean up the land, but also that it would remain in public ownership. However, a decision taken in private in 2021 changed that model. The taxpayer appears to have invested more than £260 million and provided a public loan worth £100 million. It seems that developers have secured £45 million in dividends, despite failing to invest any of their own money in the project. When were the Government aware of the transfer of 90% of the shares in Teesworks to private developers? What scrutiny and oversight did they have of decisions made by Tees Valley Mayoral Development Corporation to establish the joint venture that became Teesworks without a public procurement process? Lastly, what action will the Government take to provide reassurance that the public interest is protected, now and in the future?

[Baroness Scott of Bybrook (Con)]

I will just explain the investment of this site to the noble Baroness. It was always going to be a public/private investment. She is right that £246 million of public money has been invested in this site, and this has already secured £2 billion in private sector investment, with the prospect of 2,725 long-term jobs created as a result. To make the site investor-ready cost £482.6 million, already leaving a funding gap of £200 million; that has had to come from the private sector. It has always been the plan to kick-start the land remediation and then divest the site and risk to the private sector, which we are doing. As a result, the JV partnership—the demolition programme—which was due to take up to five years, concluded in less than three years. It is now up to the private developers to develop that site for these jobs, and for this area of our country.

[Lord Shipley (LD)]

My Lords, I think anyone who read yesterday’s Financial Times full-page article on this matter would welcome a full investigation by the National Audit Office. Since we are almost between Committee and Report on the Levelling-up and Regeneration Bill, there is an opportunity to make changes on Report in terms of audit, insofar as it might impact upon development corporations. Will the Government, through the Minister, agree to ensure that this is thoroughly checked out, to make sure that the processes being followed on Teesside are appropriate and in the public interest?

[Baroness Scott of Bybrook (Con)]

I do not think I need to repeat it, but the Mayor of Tees Valley has said that he is very happy for an independent review. Whether that is an independent review or the National Audit Office doing a full review, I think he is quite happy. The department is looking into that and will reply to him shortly. I do not think I can add any more. Nobody is stopping a full review if that is necessary, but what is important is that we have millions of pounds of private sector investment in an area that desperately needs it, for jobs and for the people of Teesside. That is levelling up; that is the important bit of this.

[Baroness Chapman of Darlington (Lab)]

My Lords, as someone who lives on Teesside, I respectfully tell the Minister that doubt over this site will damage future investment. It is already making people ask questions. The mayor has said that he wants an investigation and voices in this Chamber are clearly calling for one. I have not heard anybody here or in Teesside oppose an investigation. It is important that it is done quickly and it should be the fullest possible type of investigation that the NAO can offer, to regain the confidence that we need to enable more investment in the Tees Valley.

[Baroness Scott of Bybrook (Con)]

I have to ask those opposite who is creating this uncertainty. It is certainly not the Government, who have invested in this area. Once more, the mayor is very happy for any type of review.

[Baroness Wheatcroft (CB)]

My Lords, can the Minister confirm that it was always part of the plan that public sector investment on a massive scale should be used to hugely enrich two private sector developers?

[Baroness Scott of Bybrook (Con)]

Let me give a little background. Three Thai banks had a hold on the former SSI steelworks land. As negotiations to secure that land broke down, a compulsory purchase order was launched. JC Musgrave Capital and Northern Land Management already had back options on parcels of land within the Teesworks site that were key to those negotiations with the three banks over land owned by SSI, which was already in receivership. The STDC was advised by a top KC that, without this private sector involvement, it would very likely lose that compulsory purchase order. The public/private partnership was agreed by the TVCA, the Cabinet and the STDC board, and it was envisaged in the original business case approved by the Department for Business, Energy and Industrial Strategy, MHCLG and the Treasury that that should be the partnership to take this site forward.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, it is not people on this side creating the concern; these are reports from local people, businesses and a lot of newspapers. Please do not be offensive to this side of the Chamber. We do our best to hold the Government to account—that is our job. In this instance, the Government seem absolutely blind to the fact that there could be problems. Moving forward, an investigation is necessary and should be part of the Government’s plan.

[Baroness Scott of Bybrook (Con)]

We are not blind to that fact. We are monitoring continually, as we do when we invest in these projects, and the National Audit Office did its audit and said that the public money was being spent as intended. We will look at anything further that needs to be done. As I have said, the mayor is very happy to take part in any review.

[Baroness Pinnock (LD)]

My Lords, at the heart of this controversy is the perceived lack of transparency and accountability. This may arise from the mayoral development corporation having a board that, as the Yorkshire Post reports, is appointed solely by the mayor. Does the Minister believe that this power to appoint the board and select people who will do his will is at the heart of the problem? Will she consider changes to the Levelling-up and Regeneration Bill to change that and improve transparency and governance?

[Baroness Scott of Bybrook (Con)]

No, it is up to the mayor to decide the best people to be on his board. We have seen absolutely no evidence—if there is any, we would like to see it—of corruption, wrongdoing or illegal acts.

[Lord West of Spithead (Lab)]

My Lords, the loss of Redcar was part of the blight on British Steel. Does the Minister agree that perhaps we should put in the orders that have been thought about, but not yet ordered, for a large number of ships and that the steel in the ships being built should be found from within British Steel?

[Baroness Scott of Bybrook (Con)]

I am not going to respond to a question on British Steel, but I can say that public money—quite rightly—has decontaminated the site and taken away all the hazards, and therefore it is now right for modern green technology.

[Lord Scriven (LD)]

My Lords, does the Minister think it is okay for the joint venture to flip from a 50:50 share to a 90:10 share in favour of the private sector partners, when millions of pounds have been spent on reclaiming and decontaminating certain parts of the site? The site was then sold, reportedly for £1 per acre. When the private sector company bought it a few weeks later, it flipped it and sold it on for more than £70 million. That is why a National Audit Office report is required and the Government urgently need to implement Section 6(3)(d) of the National Audit Act.

[Baroness Scott of Bybrook (Con)]

The mayor has offered a review. We have only just got that letter; we are considering it. The public funding we put in did not create any positive land value. It was designed to remove the ongoing liability of £80 million a year that was falling to the Government after the liquidation of SSI UK Ltd. The issue of the 50:50 share shifting to 90% concerned further private investment.

[Baroness Boycott (CB)]

My Lords, can the Minister update us on what has happened with the investigation into the massive shellfish die-off, which many scientists believe was the result of the dredging when we got this land ready for sell-off, and the chemicals released from the deep seabed? It is still disputed; if there is a review, can this question be included?

[Baroness Scott of Bybrook (Con)]

I am sorry; I do not have an answer to that question, but I will take it forward to Defra and we will get an answer.

[Baroness Chapman of Darlington (Lab)]

The Minister said the Government will consider whether they will ask the NAO to conduct a further investigation, and we are grateful for that. We are very concerned, but perhaps it would help us to be bit calmer if the Minister could indicate when that might be decided upon.

[Baroness Scott of Bybrook (Con)]

I said the mayor had written to us, saying that he was happy to take part in a review, and we are looking to respond to that. Of course it is an important issue, but public money has been quite rightly invested in an area that desperately needs it after the steel industry left. There are opportunities for modern technology industries to come in—we are hearing about wind farm factories, et cetera—and we must keep this steady and online so that it can be delivered and we do not lose the investment we have.