“Secret Revealed: Untold Story Behind England’s Mayoral Development Corporations!”

The Financial Times has questions raised in recent weeks on the use of mayoral development companies (MDCs) by Ben Houchen, the Conservative Party’s high-profile mayor of the Tees Valley in north-east England.

Previously obscure public body, attention was focused on the one built for the redevelopment of the former Redcar steelworks, which today is the subject of a government-commissioned review. But the FT also later highlighted the secrecy concerns, affecting Hartlepool’s public property, while there were also dispute about a third overseen by the mayor of Tees Valley in Middlesbrough.

The FT explains what is behind these public bodies that have been around for just over a decade.

What is a mayoral development company?

MDCs are designed to accelerate development and attract investment, within a specific geographic footprint. They are statutory bodies with powers to purchase and develop land and infrastructure chaired by directly elected mayors in England.

Depending on how a mayor decides to establish it, an MDC can be vested with a variety of powers, including the ability to compulsorily buy property, build roads, make zoning decisions, and take control of existing public assets.

The legislation behind their creation was introduced in 2011, although by then 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 come from?

MDCs have their roots in the Urban Development Corporations (UDCs) set up by Lord Michael Heseltine, when he was a cabinet minister in Margaret Thatcher’s Conservative government in the 1980s.

The aim was to revive deprived city centers by bringing together business leaders and councils into one streamlined body of regeneration.

The first UDCs were established in Liverpool, which had been devastated by riots in 1981, and in the abandoned dock areas of London, where the company pioneered what would later become Canary Wharf.

Another, the UDC for Teesside was at an end investigated by the UK’s public spending regulator, the National Audit Office, in 2002. Its report criticized the secretive way in which the company had operated and found that a series of lower-value property deals had cost the taxpayer £40m of pounds.

The UDCs were not universally popular, particularly in Labour-run areas, with some councils objecting to their lack of accountability and the fact that they were enforced by central government.

Have MDCs Taken Off?

Despite the legislation having been in place for more than a decade, there are only six MDCs in all of England.

This is partly due to the short history of directly elected mayors in England, outside of London.

London has built two: one set up to capitalize on the legacy of the 2012 Olympic Games in Stratford, and the other set up to regenerate the site around Old Oak Common station which is under construction in the west of the capital as part of the HS2 project high-speed rail.

Outside London there are four, including three in the Tees Valley. The first of these 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 on 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 Labor Mayor of Greater Manchester Andy Burnham in 2019 to lead the regeneration of Stockport city centre. However, this body has fewer powers than Teesside, as the local authority has not transferred control of the planning or assets to the body.

What’s going on in Tees Valley?

All three Tees Valley corporations, for overlapping reasons, proved controversial.

The South Tees Development Corporation and its Teesworks regeneration project are now the focus of a government-commissioned investigation after concerns were raised over its liability, governance and use of public assets.

In particular, it has been criticized for by secretly transferring 90% ownership of the site to local developers. Previously, the government, STDC and developers had defended the project and the way it was being managed.

In February, Middlesbrough councilors voted against the establishment of an MDC for the city centre, but Leveling Secretary Michael Gove canceled them. The FT later reported that one of the company’s then board members, Middlesbrough Mayor Andy Preston, owned eight properties within the MDC’s footprint.

Theft reported this week that Houchen privately struck a deal with Hartlepool council for the city’s designated MDC to take control of the community’s key civic building along with planning powers over them. Houchen previously declined to comment. The council confirmed the asset listing but said the transfer was still subject to central government approval.

Are there any flaws in the model?

Proponents of MDCs, including Houchen, argue they provide a way to accelerate investment and development in deprived areas.

But Clive Betts, chairman 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 companies exist “to behave entrepreneurially, but within a framework of public sector rules, and I think sometimes they don’t sit together very easily.”

This included, at times, 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 to be underpinned by “clear rules”.

Potentially that recommendation could emerge from the Teesworks inquiry, said Betts, who said that weak trade policing was not just a problem in MDCs, but within councils that “hide behind trade secrecy in not allowing advisers to review trade agreements”.

He added: ‘If you’re going to have organizations spending millions of pounds,’ he added, you need to ‘allow adequate supervisory powers’.