Council facing subsidy control claim over allocation of regeneration funding

According to the claim summary published by the Competition Appeal Tribunal, the claimants including a Mr Graham Thomas and various companies are seeking to challenge the lawfulness, transparency, and proportionality of the council’s awards to certain undertakings, including leisure venue company STACK and regeneration charity The Auckland Project.

The challenged decisions include:

• the award of £3.8m to STACK in 2022 plus an additional £2m in August 2025;
• the award of £3.1m to the Auckland Project – Market Place Hotel – in January 2023; and
• the award of £887,000 to the Auckland Project – Artist Hub – not publicly disclosed in 2023 and officially awarded on 2 May 2025.

The claim summary said the alleged key irregularities of these decisions include:

1. For the increased STACK grant, that increase in the grant was awarded without competitive tendering and involved only one bid from its associated contractor;
2. For the Market Place Hotel grant, that this grant was only disclosed publicly in April 2025 following the planning submission; and
3. For the Artist Hub, that this remains incomplete with no evidence of delivery despite the funding being allocated.

The claim is also said to state that The Auckland Project has “disproportionate influence within the Stronger Town Board, which raises further concerns of conflict of interest, exclusion, and lack of impartiality in decision-making”.

Mr Thomas is said to have engaged with the council since 2021 regarding regeneration funding.

In December 2022, his company was awarded £315,000 for a property in Bishop Auckland. The claim states that Mr Thomas subsequently acquired further properties on the basis of representations made by the council that regeneration funding would be available. It is also said that the council also agreed to fund grants for a local business to open a bar/restaurant.

The claim argues that, in contrast to the challenged decisions and despite assurances, the council “repeatedly delayed and ultimately refused further funding, citing lack of available resources”.

It is also claimed that the council knew by January 2023 that funds were insufficient to support both the projects of Mr Thomas and the others, “yet the Defendant encouraged Mr Graham Thomas to proceed with the acquisitions, causing financial loss”.

The claim “alleges that the Defendant’s selective subsidies conferred decisive economic advantages on STACK and The Auckland Project, distorting competition in local hospitality, leisure, and cultural markets, contrary to the Act”.

The summary says the claim further alleges that the awards also meet the definition of subsidies under the Subsidy Control Act 2022 but fail to satisfy principles in Schedule 1, including proportionality, necessity, and minimisation of distortion.

The claim goes on to allege that the council failed to conduct any open or transparent process for allocating the funding and that this “was contrary to the Public Contracts Regulations 2015, in particular regulation 18”.

Finally, the claimants accuse the council of running “opaque processes, failure to publish eligibility criteria, and refusal to allow presentations from competing operators render the decisions unreasonable in the Wednesbury sense”.

The claim seeks the following relief:

1. A declaration that the contested awards constitute unlawful subsidies and/or breaches of competition and procurement law;
2. An order requiring the council to recover unlawful subsidies from the recipients;
3. An order mandating transparent, competitive allocation of future regeneration funding;
4. Compensation for losses incurred, and
5. An order for costs.

Durham County Council said it was not able comment as legal proceedings are ongoing.

The local authority was also the defendant in the first subsidy control challenge brought under the new regime. The challenge was dismissed.