TDC allowed to run up £40m debt

7 Mar 02
Dithering by senior civil servants, including the current Cabinet secretary Sir Richard Wilson, allowed the controversial Teesside Development Corporation to run up debts of around £40m, an influential Commons committee was told this week.

08 March 2002

Sir Richard Mottram, the current permanent secretary at the Department for Transport, Local Government and the Regions, told the Public Accounts Committee that the corporation's debts 'could be in the region of £40m' – almost double the £23m initially revealed in a recent National Audit Office report.

He also laid the blame for the government's lack of intervention in the corporation firmly at the feet of his predecessors, including Wilson and Treasury permanent secretary Sir Andrew Turnbull.

The TDC was set up in 1987 with the aim of regenerating declining areas in the Northeast.

It was given extensive powers and autonomy to develop its own approach to regeneration, but doubts about the suitability of financing methods used by the corporation's chief executive, Duncan Hall, began to arise long before it was wound up in 1998.

It was later discovered that Hall had consistently flouted Treasury and departmental rules on financing deals, and that members of the corporation's board did not have sufficient understanding of financial issues to question the chief executive's actions.

Mottram told the committee chair, Edward Leigh, that officials in the then Department of Environment were aware of Hall's repeated transgressions, but simply failed to stop them. 'The department was sanctioning more than was consistent with the [Treasury] guidance,' he admitted.

When pushed to reveal the identities of the officials responsible, Mottram reluctantly named Wilson, Turnbull and the now retired Sir Terence Heiser. He acknowledged that the lack of oversight by the department had been 'indefensible'.

PAC members slammed the department for not undertaking proper scrutiny of the TDC, but Mottram said that the chief executive was not fired from his post 'because it was thought that he was doing a good job at regenerating the area'.

The NAO estimated that, under Hall's guidance, the corporation attracted more than £1.1bn of private sector finance into the area and created around 12,000 jobs.

But David Walsh, who chaired Cleveland County Council's development committee, told Public Finance that although some of Hall's deals had benefited Teesside, there was 'a lot of scepticism about the added value he brought with him'.

Walsh added: 'Many deals virtually gave away land at knock-down prices. Many people … also felt that most of the development would have taken place anyway.'


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