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Freeports won’t save Ben Houchen

The project of levelling up is crumbling around the Tees Valley mayor.

By George Walker

One of the Prime Minister’s favourite rhetorical tricks is to ask: “Look at what is happening on Teesside.” The area includes previous Labour strongholds such as Stockton South, Darlington and Redcar in Tees Valley, and Sedgefield and Bishop Auckland in nearby County Durham, which were key bricks in the so-called Red Wall. Well, what would you see if you looked at Teesside? Since 2019 – in Tory minds at least – you would be the witness of several flagship levelling-up projects.

Its poster boy is the Tees Valley mayor Ben Houchen, a walking symbol of the new interventionist conservatism that supposedly accompanied Boris Johnson into Downing Street in 2019. Houchen was first elected in 2017 (to some surprise), beating the Labour candidate by a couple of thousand votes. He predicted that his victory sounded the start of a “political earthquake” in the region.

Senior Tories flocked to Houchen. In 2021, the Levelling-Up Secretary Michael Gove visited the Teesworks freeport, the project that sought to regenerate the area’s economy, and said: “If you want to know what levelling up is, come to Teesside.” Gove claimed at Conservative Party conference the same year that Houchen had “revived, regenerated and renewed” the area. Johnson was said to be “obsessed” with the mayor, who easily won re-election in 2021. In the foreword to 2022’s Levelling Up white paper, Houchen is cited by its authors, who include Gove, as an example of “inspirational leadership”. Most recently, among the political bust-up over his resignation honours list, Johnson nominated Houchen for a peerage to the House of Lords.

However, like the humiliated former prime minister whose star dovetailed with Houchen’s own, Teesworks is now feeling the white heat of scrutiny. While initially signifying the Tories’ commitment to deprived regions, there’s a sinking sense that it may become synonymous with the evasion of truth that characterised Johnsonism.

[See also: Where next for levelling up?]

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The success of the Teesworks freeport was the litmus test for Houchen and levelling up. Freeports and expansive “investment zones” were the Tories’ one consistent big economic idea under Johnson, Liz Truss and Rishi Sunak.

A freeport is a site, typically situated on a coastline, designed to seamlessly benefit from international trade. Crucially, the freeport exists geographically within the nation’s borders but outside its tax regimes. This means it avoids things like import and export duties in order to stimulate business and thereby economic growth.

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When Houchen was first elected, he wanted to purchase former industrial sites on the banks of the South Tees in Redcar to make space for a freeport. Two years later he got his way as the Tees Valley Combined Authority used a compulsory purchase order to buy 1,420 acres from Tata Steel, and 870 acres from a consortium of Thai banks who held the land after the SSI steel company who operated there went into liquidation. Those two companies had bought the land after British steelmaking collapsed under David Cameron.

The mayor obtained freeport status for the sites. Teesworks became the Conservative’s freeport laboratory. The Conservative Redcar MP Jacob Young romantically dubbed it the biggest opportunity since iron ore was first found in the Eston Hills of North Yorkshire.

It’s easy to understand the significance of Teesworks. Walking from Saltburn to Marske on one of the Cleveland coast’s long beaches, it’s hard to find anyone who wasn’t awestruck by the looming, heavy industrial Redcar skyline, dominated by its blast furnace. It was once responsible for the smelting of millions of tonnes of iron, then transporting it down the road to the BOS (basic oxygen steelmaking) plant, where it was refined into the steel that built megastructures like Sydney Harbour Bridge.

Because of this heavy industrial history, the site and the surrounding waters became and remain heavily polluted, with the River Tees bombarded with unknown quantities of effluent. Locally, it was an open secret that the Tees was probably the most polluted river in Europe, with companies such as the old British Steel and Imperial Chemical Industries having long dumped industrial waste into it. Additionally, the site itself is littered with scrap metal from its steelmaking past, with the dirtier and less valuable slagheaps littered on the ground alongside more valuable metals like copper.

As part of the development of the freeport, this skyline has been torn asunder, piece by piece, with controlled explosions authorised by Houchen. Contracts were made with manufacturers such as SeAH, the wind-turbine parts factory plucked from the Humber freeport further south, with Teesworks purportedly on the road to becoming the world’s first net zero “industrial cluster” by 2040.

[See also: The levelling-up agenda has failed young people]

Freeports aren’t a unique innovation in economic regeneration. They’re part of a wider genealogy. The historian Quinn Slobodian calls them “economic zones” in his book Crack-Up Capitalism. Slobodian describes such a zone as “an enclave carved out of a nation and freed from ordinary forms of regulation”. These are areas in which “the usual powers of taxation are often suspended within its own borders, letting investors effectively dictate their own rules”.

As a backbencher, Rishi Sunak talked up the benefits of freeports. In 2016 he wrote a lengthy report for the Centre for Policy Studies on the opportunity they would provide for a more free-trade oriented, post-Brexit Britain. For Slobodian they represent capital’s desire to escape democracy, but for Sunak freeports deliver the benefits of disregarding regulatory regimes and contribute to “Britain’s new global role”. Freeports are supposed to evade typical nation-state-enforced regulation, allowing business to innovate and grow freely.

At Teesworks, there is an uneasy feeling that it has turned too strongly towards private interests rather than public. Extensive reporting from Private Eye, the Yorkshire Post and the Financial Times has raised questions about the use of public money and the port’s ownership.

This began before the Teesworks site was even given freeport status. When Houchen and the Tees Valley Combined Authority first bought the sites in 2019 and 2020, they needed money to clear the infrastructure and toxic material there, setting up the South Tees Development Corporation (STDC) to manage the huge project. However, it was clear from the start that public money wasn’t going to cover it, and that private-sector capital was required. As part of the compulsory purchase orders, local property developers Chris Musgrave and Martin Corney were brought in to provide the investment needed to initiate the project, and in return companies they owned obtained a 50 per cent share of Teesworks in 2020. The 1,420-acre site cost £11.5m, and the 870-acre area cost just £1 due to the huge costs of knocking down old infrastructure and remediating the site.

As the project rumbled on, agenda papers from the STDC in early 2021 made it clear that “capital funding streams” were running out, and by November 2021 a further 40 per cent of the freeport’s shares were transferred to Corney and Musgrave under the moniker of DCS Industrial, a company owned wholly by the pair which would help with the expensive clean-up of the site. Without a full and competitive tendering process, the ownership of a purportedly public-led project, which has to date received £260m of government money, was now 90 per cent in private hands.

[See also: How would Labour do levelling up?]

The two remaining Labour MPs on Teesside, Andy McDonald and Alex Cunningham, in Middlesbrough and Stockton North, respectively, raised questions about the freeport from its inception.

McDonald queried its ability to deliver good unionised jobs, and, after the change in ownership – from the 50-50 partnership between the public and the Musgrave-Corney consortium, to the latter’s 90 per cent takeover – broke in the press, he demanded in early 2022 an independent inquiry into the freeport. Cunningham backed McDonald in parliament and urged transparency to ensure “the economic future of Teesside”. Houchen responded by branding McDonald in a now-deleted Facebook post a “taxpayer funded troll”, and that the MP has “chosen to make up a conspiracy theory”.

Further reports in the Mirror suggested that Musgrave and another local businessman on the board of DCS Industrial, Ian Waller, had donated to Houchen and the Conservative Party in the past. At the time, the Tees Valley mayor refused to comment on donor links but said private-sector investment was important for delivering jobs to the area.

With the reissuance of shares in November 2021, an option for the business consortium to buy land on the Teesworks site at market value was changed. It seemingly allowed the owners to buy land at just £1 per acre. Private Eye reported that important land on the site of the new SeAH wind farm manufacturing base was bought by Teesworks (now majority privately owned) for £96.79 from a subsidiary of the local authority – ergo at the expense of the taxpayer – making a rapid and tidy profit in the process for Teesworks. Houchen told the Northern Echo in response to these reports that the property deal had been reviewed by the cross-party Tees Valley Combined Authority cabinet and approved unanimously. He also said “if it wasn’t for this public-private partnership, we would not have touched a single part of the steelworks, [and] we wouldn’t have landed a single investment”.

There are also concerns that private contractors are making a profit from the site’s valuable scrap metal, with another report from Private Eye in July 2022 claiming that Teesworks had sold 206,000 tonnes for £63m. There are also questions about how much, if any, capital the private owners have actually put into the site. An awkward interview Houchen gave to the BBC’s Newsnight in May this year hardly inspired confidence.

Momentum for an independent investigation into the freeport’s finances is increasing. In August 2022, Houchen tweeted that the National Audit Office (NAO) had signed Teesworks off “with flying colours” about its use of public money. But the NAO had simply confirmed that public money was being used as intended; it was not a comprehensive financial review.

In May 2023, the shadow secretary for levelling up Lisa Nandy wrote to the NAO requesting a full investigation. Houchen supported this request because he wanted to “nip allegations of wrongdoing in the bud”.

This is where things got a bit weird. After those requests were made, on 19 May Darren Jones, Labour MP and chair of the Commons Business and Trade Committee, received a series of letters from the NAO saying it couldn’t authorise the investigation without approval from ministers. Meanwhile the Prime Minister batted questions away about Teesworks and its contractors at PMQs as “a commercial matter”.

A few days later, there was a full U-turn. Gove responded specifically to Houchen’s official request for an investigation. The minister said there was no organisation that could investigate said matters, and that instead he would himself directly appoint a panel to undertake “an independent, external assurance review”. Gove’s three-person panel has been confirmed and has started looking into the project.

Is the freeport programme too politically important to be held to proper scrutiny? In the latest Budget, two additional freeports were announced for Wales, as well as an expansion of “investment zones” – freeports on steroids. The success of Teesworks is bigger than Redcar.

But what if the story isn’t wholly clear to anyone, never mind the regulators? With big investors such as BP and the energy company Equinor reportedly seeking legal assurances about the freeport’s finances, Houchen is under pressure to keep the project viable from private interests as well. When Andy McDonald recently called for total transparency on the freeport’s ownership in parliament, the mayor replied in the same accusatory manner he had before: he called the MP a “coward who stood up in parliament and lied”, and that he was even an abuser of parliamentary privilege.

There’s also been controversy over the dredging of the polluted Tees riverbed as part of the freeport’s expansion. The independent research suggesting that the process contributed to the mass death of marine creatures in the surrounding coast has only added to distrust over the transparency and standards at Teesworks.

Quinn Slobodian concludes that the “economic zones” he identified are ultimately a distinct project of the state: they are used to embolden the role of private capital to run the economy as a “sleek alternative to the messiness of mass democracy” so that business can simply “get on with it”. The legitimacy of both Teesworks and the government’s use of deregulatory zones for the political programme of levelling-up deprived regions is at risk. They seem the opposite of sleek; they are very messy indeed.

[See also: The shattered Tory bloc and the end of levelling up]