The Financial Times has raised questions in recent weeks over the use of mayoral development corporations (MDC) by Ben Houchen, the Conservative party’s high-profile mayor of Tees Valley in north-east England.
A previously obscure type of public body, the focus has been on the one set up for the regeneration of the former steelworks at Redcar, which is now the subject of a government-commissioned review. But the FT has also highlighted concerns about secrecy at a second, affecting public assets in Hartlepool, while there has also been controversy around a third one overseen by the Tees Valley mayor in Middlesbrough.
The FT explains what lies behind these public bodies that have existed for just over a decade.
What is a mayoral development corporation?
MDCs are designed to accelerate development and attract investment, within a specific geographic footprint. They are statutory bodies with powers to buy and develop land and infrastructure chaired by directly elected mayors in England.
Depending on how a mayor decides to set it up, an MDC can be given a range of powers, including the ability to compulsorily purchase property, build roads, take planning decisions and take control of existing public assets.
Legislation underpinning their creation was introduced in 2011, although at that point only London had an elected mayor. Since 2017, nine areas outside the capital have also introduced mayoral systems with the potential to set up MDCs.
Where did the idea originate?
MDCs have their roots in the urban development corporations (UDC) established by Lord Michael Heseltine, when he was a cabinet minister in the Conservative government of Margaret Thatcher in the 1980s.
The aim was to revive deprived inner cities by bringing business leaders and councils together into a single streamlined regeneration body.
The first UDCs were set up in Liverpool, which in 1981 had been ravaged by riots, and London’s derelict docklands, where the corporation paved the way for what would eventually become Canary Wharf.
Another, the UDC for Teesside was eventually investigated by the UK’s public spending watchdog, the National Audit Office, in 2002. Its report criticised the secretive way in which the corporation had operated and found that a series of below-value land deals had cost the taxpayer £40mn.
UDCs were not universally popular, particularly in Labour-run areas, with some councils objecting to their lack of accountability and the fact they were imposed by central government.
Have MDCs taken off?
Despite the legislation being in place for more than a decade, only six MDCs exist across England.
That is in part owing to the short history of directly elected mayors in England, outside of London.
London has established two: one set up to capitalise on the legacy of the 2012 Olympic Games in Stratford, and the other established to regenerate the site around the Old Oak Common station that is under construction in the west of the capital as part of the HS2 high speed rail project.
Outside of London there are four, with three of those in Tees Valley. The first of those was the South Tees Development Corporation, which was officially established in 2017 to regenerate the Redcar steelworks — a project now known as Teesworks. Chaired by Houchen, it originated from a 2016 report by Heseltine into how to regenerate the site, in which he proposed a modern version of the UDC.
Houchen has, in the last year, set up MDCs in Middlesbrough and Hartlepool.
The other was set up by Greater Manchester’s Labour mayor Andy Burnham in 2019 to drive the regeneration of Stockport town centre. That body has fewer powers than those in Teesside, however, as the local authority has not transferred planning control or assets to the body.
What is happening in Tees Valley?
All three of Tees Valley’s corporations have, for overlapping reasons, proved controversial.
The South Tees Development Corporation and its regeneration project Teesworks now the focus of a government-commissioned investigation after concerns were raised about its accountability, governance and use of public assets.
In particular, it has been criticised for secretly transferring 90 per cent of the site’s ownership to local developers. Previously, the government, STDC and the developers defended the project and the way it was being managed.
In February, Middlesbrough councillors voted against the establishment of an MDC for the town’s centre but levelling-up secretary Michael Gove overruled them. The FT subsequently reported that one of the corporation’s then-board members, Middlesbrough mayor Andy Preston, owned eight properties within the MDC’s footprint.
The FT reported this week that Houchen privately struck a deal with Hartlepool council for the MDC designated for the town to take control of the community’s key civic building along with planning powers over them. Houchen has previously declined to comment. The council confirmed the list of assets but said the transfer was still subject to sign off by central government.
Are there flaws in the model?
Supporters of MDCs, including Houchen, would argue they provide a way to fast-track investment and development in deprived areas.
But Clive Betts, chair of the House of Commons local government select committee and leader of Sheffield council when the city had a UDC in the 1980s and 1990s, said there were weaknesses in the MDC model.
The challenge, he said, is that such corporations exist “to behave in an entrepreneurial way, but in a public sector framework of rules, and I think sometimes they don’t sit very easily together.”
That included, on occasion, a lack of understanding in relation to public procurement rules, he said.
The tension between delivery and commercial confidentiality on the one hand, and public sector accountability and governance on the other, he added, therefore needs underpinning with “clear rules”.
Potentially that recommendation could come out of the inquiry into Teesworks, said Betts, who said weak scrutiny of commercial activities was not only an issue in MDCs but within councils that “hide behind commercial confidentiality in not allowing their own councillors to scrutinise commercial arrangements”.
He added: “If you’re going to have organisations spending multi millions of pounds,” he added, you have to “allow proper powers of scrutiny.”