The government has ordered a statutory inspection of Tees Valley Combined Authority (TVCA), citing concerns about its long-term financial sustainability, debt levels and governance arrangements.

Minister for Local Government, Devolution and Regional Growth Jim McMahon announced the decision on 15 October. The authority, led by Tees Valley Mayor Ben Houchen, has been under a non-statutory Best Value Notice since April 2025.

The inspection represents a further escalation of government scrutiny. Inspectors will examine whether TVCA is meeting its statutory duty to secure continuous improvement in how it manages public resources.

In a written statement to Parliament, McMahon said he had “material concerns” about TVCA's long-term financial sustainability, citing high debt, increasing borrowing and interest costs and declining revenue reserves in recent years.

He said improvements to governance and assurance were under way, but was concerned about the scale of work outstanding. He was not yet assured that TVCA had the capacity, capability or appropriate arrangements needed to respond to the remaining risks.

McMahon said there were “signs of potential Best Value failure”. The decision to inspect is not itself a finding of failure.

The government has appointed Laura Shoaf, former chief executive of the West Midlands Combined Authority, to lead the inspection. Three assistant inspectors will be appointed on her recommendation.

The review will examine governance and decision-making, oversight of the authority's associated bodies, financial management, audit and accounting arrangements and its plans to manage debt. It will also assess leadership capacity, the authority's Organisational Excellence Strategy and how its arrangements affect organisational culture, partnerships, community engagement and service delivery.

Particular attention will be paid to lending arrangements between TVCA and South Tees Development Corporation (STDC), which oversees the regeneration of the former Redcar steelworks site.

McMahon welcomed TVCA's recent agreement of formal loan repayment arrangements with STDC, including changes intended to strengthen cabinet oversight. However, he said independent assurance was still needed about the assumptions behind those repayments and the management of associated financial risks.

The inspection follows the independent Tees Valley Review published in January 2024, which identified issues with governance and transparency but found no evidence to support allegations of corruption or illegality. Shoaf's appointment letter directs her to assess whether TVCA has fully implemented that review's recommendations.

The government subsequently issued its Best Value Notice on 3 April 2025, with a formal review due after 12 months. In April 2026, the government said the notice would remain in place until the department confirmed next steps.

The earlier review examined arrangements surrounding the Teesworks regeneration project, including its public-private ownership structure. Review North previously examined the site's development and governance in its coverage of Teesside Freeport.

TVCA's latest draft statement of accounts puts its actual borrowing at £429.17m at 31 March 2026, against an underlying capital financing requirement of £662.77m. The latter measures the authority's underlying need to borrow to finance capital expenditure, rather than debt already taken on.

The accounts also record £392.8m in loans made by TVCA to STDC. This is a lending balance, not additional borrowing to be added to the £429.17m figure.

TVCA reported an average borrowing cost of 4.04 per cent for 2025/26, up from 3.87 per cent in the previous financial year. The accounts attribute the increase to higher costs on new borrowing and refinancing.

TVCA's own accounts acknowledge that long-term regeneration projects and the associated borrowing introduce financial risks. However, the authority says these risks are documented and monitored, with mitigating measures in place. It also reports that TVCA and its development corporations set balanced budgets for 2026/27.

Under the Local Government Act 1999, inspectors have statutory powers to obtain documents and information from the authority. Their findings will inform the government's decision on whether further action is necessary.

The possible outcomes range from continued monitoring and support to statutory intervention. If ministers conclude that the authority is failing its Best Value Duty, they can issue binding directions requiring improvements or appoint commissioners to oversee specified functions.

No such intervention has been announced at TVCA.

In response to the inspection, a TVCA spokesperson said the authority welcomed Shoaf's appointment and would “work openly and constructively” with the inspection team.

The authority said the process would provide an opportunity to demonstrate improvements already made. It acknowledged that further work was needed and said it would continue strengthening its arrangements.

Shoaf has been directed to report her findings to the Secretary of State by March 2027, although the deadline can be extended by agreement. Ministers will then decide whether further action is required.