Governance under fire at devolved body chaired by Lord Ben Houchen

Governance arrangements at the combined authority in north-east England chaired by Conservative mayor Lord Ben Houchen have come in for more criticism from external experts, according to documents seen by the Financial Times.

The Tees Valley authority, which oversees the Teesworks regeneration project, had failed to fully meet internal auditing standards, one independent review concluded. A second found that scrutiny was being hampered by “mistrust” and “antagonistic” relationships, the documents showed.

The findings follow a long controversy over value for money at Teesworks and the public-sector governance of its activities.

They will also have broader implications beyond Teesside, however, because of the role of devolution in the new Labour government’s growth agenda. The Tees Valley combined authority is one of several such devolved English bodies tasked with economically developing their areas, chaired by directly elected mayors.

The Centre for Governance and Scrutiny, a consultancy focused on promoting better governance and security, concluded that “combative” behaviour between the mayor and local councillors had resulted in “interactions that are unfocused, unproductive and bad-tempered”, according to the documents.  

Scrutiny is “not effective” as a result, it found.

Separately, the Chartered Institute of Public Finance and Accountancy concluded that most nationally set internal audit standards were not being fully met. 

No internal audit had been carried out by the combined authority for 15 months, said the accountancy body.

The two bodies were invited to examine governance arrangements at the combined authority following a previous independent review of Teesworks, a public-private partnership aimed at regenerating former steelworks at Redcar.

That review concluded in January that not enough processes for public sector governance had been put in place to safeguard value for money. The project has cost the taxpayer more than £500mn while proving lucrative for its private development partners.

The report recommended external experts be drafted in to look more closely at the combined authority’s oversight processes.

In its resulting report on scrutiny and oversight, written this month, the CfGS said certain weaknesses were common to other combined authorities.

But it noted “an antagonistic relationship” between Houchen and those councillors tasked with scrutinising his decisions, as well as a “mistrust” of his officials among councillors. 

It also pointed to “issues around mayoral attendance” at scrutiny sessions, alongside “the behaviour of the mayor and members of the committee on those occasions when the mayor does attend”. 

Neither councillors nor the combined authority’s executive carry out “meaningful preparation” ahead of such “set piece” appearances, it found.

Relationships needed to be reset, it said, as well as agreement reached locally over the exact matters which councillors were allowed to scrutinise.  

CIPFA reviewed internal audit arrangements at the Tees Valley combined authority, and found that only four out of 11 nationally prescribed “public sector internal audit standards” were being met in full.

These standards include a requirement for the authority to carry out a self-assessment of its internal audit arrangements.

The accounting body said that, despite the authority stating that one had been carried out, “numerous requests” had not led to the document being provided.

Further investigation provided “no evidence” that one existed, it said, adding: “We have concluded therefore that no self-assessment has been performed.”

Since new internal auditors TIAA were appointed in spring 2023, no internal audit had been completed, it said. 

CIPFA also raised concerns about the audit arrangements for Tees Valley’s three mayoral development corporations, arms-length regeneration bodies tasked with assembling land and fast-tracking development. 

The MDCs in Middlesbrough and Hartlepool, both established over a year ago, had yet to hold an audit meeting, it found. “This is a significant governance issue that needs to be urgently addressed,” it said.

The TVCA said KPMG had now been appointed to audit the Middlesbrough and Hartlepool MDCs, adding that internal audit reviews have been scheduled for the 2024/25 cycle.

CIPFA issued six urgent recommendations, including for the authority to carry out separate internal audit plans for connected bodies such as the MDCs, for the publicly owned Teesside airport and for the public-private partnership regenerating the Teesworks steel site at Redcar. 

The TVCA stressed that the review’s work had been “backwards looking” and did not reflect any changes made since.

“Since publication, we have worked hard with local authority colleagues on responding to the recommendations of the Independent Review — and the whole purpose of this work has been to address many of the points raised in these two reports,” it said.

“The vast majority of the points raised by CIPFA are historic — and the work which has been done, and is lined up, in response to the Tees Valley Review is addressing these,” it added.