Combined authority issued with best value notice

The Ministry for Housing, Communities and Local Government (MHCLG) has issued Tees Valley Combined Authority with a best value notice over governance and culture concerns.

In a letter to the combined authority's Chief Executive, Tom Bryant, MHCLG's deputy director of Local Government interventions, James Blythe, said the department's concerns "relate primarily to governance, culture, partnerships and continuous improvement".

The best value notice, which was issued under Section 230 of the Local Government Act 1972, is set to last for a period of 12 months before being up for review.

The letter said the concerns identified included the audit reports for TVCA and its development corporation, the South Tees Development Corporation, which "identify significant weaknesses in value for money arrangements across financial sustainability, governance and improving economy, effectiveness and efficiency".

It also pointed to the findings of the Tees Valley review, a review by the Centre for Governance and Scrutiny (CfGS), and an internal audit undertaken by the Chartered Institute of Public Finance and Accountancy (CIPFA).

Audit reports for 2023/24 that identified "significant weaknesses" in the use of resources in relation to the Tees Vallery review, also contributed to the decision, the letter said.

Blythe acknowledged that the authority had "engaged constructively" with the Tees Valley review and is already taking steps to address the concerns raised.

He also recognised that the appointment of an external Local Government Association (LGA) panel will provide valuable support and challenge as the authority continues to improve.

A separate letter to Tees Valley Mayor Ben Houchen, from Local Government Minister, Jim McMahon, meanwhile said further assurance was required, despite the combined authority’s efforts to address recommendations made by the independent review.

McMahon said: “Having carefully considered your response to the Tees Valley independent review and the external auditor’s recent assessment finding weaknesses in value for money arrangements, I have concluded that I require further assurance.

“Specifically, I require assurance of how your action plan will be implemented and embedded over time, to ensure it has the necessary impact on governance, culture and relationships.”

The notice requests that the authority engages regularly with the department, provides it with a clear and cohesive strategy for improvement across all the recommendations given to your authority, which includes milestones and measures of impact, and  strengthens the capacity, scope and role of the external LGA panel.

McMahon also announced in his letter that MHCLG is set to publish guidance clarifying the governance, oversight and legislation of Mayoral Development Corporations.

This comes in response to a recommendation from the Tees Valley independent review that called on Government to publish guidance on this area.

He said: “I am writing separately to you and other mayors of combined and combined county authorities about this guidance. A further recommendation covers issues around landfill tax and public sector land remediation - this is being considered, and a response will be provided in due course.”

The notice set out the following further expectations for improvement at the authority:

• Develop a clear, overarching and holistic improvement plan. This may include or draw upon improvement or action plans prepared before the date of this notice. This plan should be agreed by officers and members at the authority within three months of the date of this notice. The plan should:
  • address all recommendations from the independent Tees Valley review and reports produced by CfGS and CIPFA;
  • include milestones and measures of impact across all elements to enable transparent reporting of progress to Cabinet, the overview and scrutiny committee, and the LGA panel;
  • include specific focus on improvements to the effectiveness of the overview and scrutiny function at the authority;
  • set out how the authority will make and measure the cultural and relationship changes necessary to make a success of structural and procedural changes to governance and scrutiny in the authority; and
  • be regularly updated to take account of future recommendations from external auditors, other external scrutiny and reviews, and other relevant matters arising during the notice period.
• Review the composition and scope of the LGA panel, in particular to consider:
  • strengthening the panel’s emphasis on governance, commercial expertise and officer capabilities
  • embedding the panel’s involvement in live issues at TVCA, such as the appointment of a new permanent Chief Executive o developing the panel’s terms of reference to include public reporting of its work and assessment of TVCA’s progress at regular intervals.
• Engage fully with the recommendations made by the LGA panel.
• Have appropriate mechanisms in place to ensure the authority is informed on updates to government guidance or legislation and can demonstrate how the authority is responding effectively to relevant changes.
• Engage regularly with the department at official level throughout the period of this notice, on at least a quarterly basis.

The Ministry will look to the LGA panel and the combined authority's external auditor for updates.

Responding to the notice, TVCA Mayor Ben Houchen said: “I’m pleased the Government has recognised the real progress we’ve made – and confirmed there is no need for a National Audit Office investigation.

“That’s the right call, and it reflects the work we’ve done to improve governance while continuing to deliver for local people.”

He added: “No organisation is perfect, and my fellow Labour council leaders and I must reflect on this as the Combined Authority improves. But let’s not lose sight of what really matters: thousands of good-quality jobs, billions in private investment, and global companies choosing Teesside as their home. That’s the ‘best value’ we’re delivering for local people every single day.”

Adam Carey