Examination of witnesses (Questions 240-259)
WEDNESDAY 14 MARCH 2001
MR RICHARD ADAMS, MR DAVID BUTCHER, DR JOHN MANN AND MR MICHAEL CULVERWELL
240. I am trying to give you that opportunity now?
(Mr Adams) We accept that it is a market which is in competition with other markets in London, of which we own three. We have not sought to damage the market as a horticultural market at all. The Corporation does not have a policy to acquire New Covent Garden: first, it was never on offer to us; and, secondly, we believe that our hands are fairly full trying to keep up with the three that we have. We have just spent £50 million on Smithfield and another £2 million on Billingsgate. We see no reason to acquire another market which, in our view, could only detract from the three that we have.
241. That is a partial answer. Would you welcome it not being owned publicly, not being in the hands of the Government but being in the hands of somebody else?
(Mr Adams) I do not think we have a feeling on it, I really do not. While it continues to exist, it does not matter to us who owns it.
242. Are you saying that you have already made up your minds that if it is on offer for sale, to be privatised, that you are not going to be interested?
(Mr Adams) We have not made up our minds, no.
243. Is this an issue on which, again, you are trying not to declare your hand or genuinely, you would not have thought that one through. The proposal has been around for a long time now and this Minister has reinforced that position and the view we had from the Minister during our inquiry was that there was a likelihood that it was going to be sold. Presumably, it would be a big financial issue for you and also an important one in terms of your own markets?
(Mr Adams) I have no doubt that somebody who is trying to sell a market which we are told needs £20 million worth of maintenance in the next few years and has not a lot of income would obviously like to foster the view that somebody wants to buy it. We do not want to buy it. We can see no benefit for the Corporation in having extra capacity in London which we think is unnecessary.
244. You said you do not want to buy it but a moment ago, you gave the impression that it was a decision you had yet to make?
(Mr Adams) I am sorry, you asked me if we have made a decision of an interest and the answer is that we have not made a decision.
245. When you say to me now, "We do not want to buy it", you are saying that is the position today but it may be different next year?
(Mr Adams) If the Minister asked us to purchase it or to take itif I can put it that wayrather than purchase it, because of the figures that have been raised in hereI think Mr Mills referred to £25 million to £40 millionin my view it is just a non-runner as far as the Corporation is concerned. If it were on different terms, the Corporation, as a public body that is providing an important service for Londoners as a whole, would have to give the request from the Minister serious consideration. But we are not actively pursuing the market.
246. In your memorandum, you actually did point out a difficulty, it seemed to me, in the market being in public hands, in that there is a potential conflict of interest if the Minister allows his market to change its nature at the expense of others in the capital?
(Mr Adams) Yes.
247. I would have thought you would have seen that as quite a general problem with a market in public hands?
(Mr Adams) In many ways, I regard the Corporation as having it in public hands as well. To that extent, it would not matter to the Corporation if it was owned by another authority, corporation or private owner. I do see a conflict of interest in the Minister having the ability to change the nature of what can be sold there when he is the person who is going to benefit from that decision. I say "he", obviously I mean the office.
248. I am not sure whether you have seen the second memorandum submitted by the Minister to us in which it says in paragraph 4, in response to that speculation, that that objection is not valid. It says, "The Covent Garden Market (Financial Provisions) Act 1977 requires any money so paid to the Minister to be paid into the consolidated fund. The Ministry therefore derives no benefit from the money". Have you seen that?
(Mr Adams) I have not seen that.
249. Do you accept that that covers the problem?
(Mr Adams) No, I regard the Minister as part of the Government and to that extent, I would regard a decision that benefits the public exchequer as a decision which is under the control of the Minister and, therefore, it is not him personally who benefits obviously. If it was taken that way, it was taken wrongly and I must have misrepresented the position. I regard it as a case where the Minister who is appointed by the Government is making the decision.
250. So it is the Government rather than the individual Minister?
(Mr Adams) Yes, indeed.
251. With collective Cabinet responsibility and that sort of thing?
(Mr Adams) Yes.
252. So at the moment, you are not really pushing for privatisation and nor are you opposed to it?
(Mr Adams) No.
253. Would there be any changes in your views and attitudes towards Covent Garden if it was in different hands, in private hands following a privatisation process?
(Mr Adams) No, we accept that it is a statutory competitor, if you like.
254. You are not interested at the moment and you seem to be mildly dismissive of the opportunity, setting it out rather as a liability to take on rather than an opportunity. Presumably that attitude is framed around planning constraints on the site as it is perceived at the moment and the perspective of the rights of anyone operating the market there. If those changed radicallyeither of thoseperhaps your attitude might change?
(Mr Adams) As far as planning is concerned, I do not think it would because I could not foresee a prudent Minister offering us a site as a market without putting a provision in the contract that if it ceased to be a market, he would want to renegotiate the price.
255. There are other possibilities because there have been changes in the use of parts of the site over time. We were shown parts of the site which have been disposed of for other purposes while retaining the core market function and more efficient organisation of the site might yield further changes?
(Mr Adams) Indeed. I do not think planning is a problem as far as we are concerned because, as I say, I think that would come down to the price that was paid for it and that would be taken into account. One of the objections or the reluctance we have to acquire that is that we have ourselves been "caught" by restrictions which apply to us on our other three markets, where we are caught by the provisions of the legislation which mean that we cannot run it as a prudent commercial organiser would run a commercial business. When we started looking at what work was necessary to bring Smithfield up to standardEU standards of hygiene and so onwe knew that we were going to have to spend a lot of money and we would not improve the location of that site. The location is one of the things that is damaging Smithfield at the moment. We talked about how far you could walk in six and two-thirds miles. Quite often the traffic around Smithfield just comes to a deadlock and there is no movement. We knew that was the case but when we looked at the alternatives of shutting the market or moving it to a new site, we found that the hurdles that we would have to overcome in acquiring a Private Bill, a Private Act, to do it was certainly one of the big complications as far as we were concerned. Considering the number of interests that we would have to persuade that it was right that it should close or move, we actually came to the conclusion that to pay the bill was probably our only practical option. When we started, I do not think that even the most pessimistic person really believed that it was going to cost us the £50 million that it did, partly because of the fact that the buildings are listed and we have had to make changes which are in keeping with the listing and so on.
256. So from what you have said, your rather diffident approach to potential ownership is framed by the lack of a coherent legal framework for operating markets across London, including both the one we are discussing here but also your own and by lack of a strategic mechanism for working out how to distribute the various opportunities between the various markets, if there were more than one within the capital?
(Mr Adams) Yes. We do not have a situation where, as part of our best value review of the services that we provide, we have looked at whether we could improve the running of our markets by amalgamating two or more of them on a more convenient site. We have been advised that the cost of building, never mind the compensation to the tenants and so on and the cost of the land, is probably £150 million. That is a big hurdle. But the hurdle of getting the necessary legislation and persuading all the interested parties that it is good to move is a hurdle which at the moment we believe is insurmountable by us on our own.
257. Perhaps the issue is whether in modern terms, it is sensible to have markets in the hands of a corporation such as your own, with all the constraints that that places upon you, and that when we have been discussing the future ownership of Covent Garden, perhaps we should also consider the future ownership of your own markets and whether it is sensible to place them in the hands of what is one of the strangest public bodies in this country anyway and live with the constraints that that offers. I do not expect you to answer that entirely.
(Mr Adams) The Corporation acquired, purchased the private rights in connection with Spitalfields Market. But even when we came to move Spitalfields Market, it was not the fact that we were a public body that caused us a problem; it was the fact that an Act of Parliament was required to make changes. Even a private owner, at the moment, would require to go and obtain private legislation and in this country private legislation is very complicated and very expensive. As far as somebody else taking it over is concerned, I should say in some ways, good luck to them. The income this year from Smithfield is about £7 million short of our outgoings. That does not make commercial sense. Therefore, one of the things was that the market was dependent on the Corporation for its funding. We are not doing it as a financial investment. There is no way it could be called that.
Mr Jack: I would like to explore a little more closely the commercial side because in your evidence to the Committee, you indicate that effectively, your existing markets are doing very well. That is at paragraph 4.
Mr Todd: He has just said something completely different, what a struggle it is and how unattractive they are.
258. Indeed, but paragraph 4 says, "Changes to the nature of trading at New Covent Garden could have very serious implications on the Corporation's markets". I am interested in the word "could" in the light of other evidence. Apart from the Smithfield market, about which you say that there is a deficit between operating costs and income, the impression I gained, particularly in the context of Spitalfields, is as it says here in paragraph 5, that that market is fully let, which seems to be an indication of some success. What are those serious implications which "could" affect your other markets in terms of the potential diversification strategy of the New Covent Garden?
(Mr Adams) Spitalfields is a direct competitor as a horticultural market, a market of horticultural produce. We have not anticipated that Covent Garden changing to a one-stop shop would reduce the demand for space at Spitalfields. Since we moved Spitalfields out, ten years ago, it has, as far as we are concerned, been a success and the traders clearly like the improved access and so on out there and it is full. The two markets which we see as likely to be affected would be Smithfield and Billingsgate where they would, for the first time, be subject to more competition from another market. At the moment, there is no real competition for Smithfield other than within itself. It is the country's biggest meat market. It takes meat from all over the place. What we are saying is that Smithfield is poorly located. There is no question about that. To have a meat market in the centre of London's financial district is nonsense, particularly with the traffic being as congested as it is. But if another market comes along, there will be some tenants, we have no doubt, who will say, "I would prefer to try my luck at New Covent Garden". When we undertook the redevelopment of Smithfield, the market was originally five buildings strong. After discussions with the traders and everybody else concerned, it was agreed that during the refurbishment or redevelopment, whatever you like to call it, the amount of trading space would be reduced because there was just too much as it was for the number of traders that there were. If we got it down to the size that we think is just about maintainable, we could be faced with a situation where some of those tenants would probably go to Covent Garden. I do not think there is any question that some would wish to try it. If they left Smithfield, it would mean that the job of running Smithfield would be even less commercially viable than it is at the moment.
259. But does that not go back to the lines of questioning that Mr Todd was putting forward, that what we are seeing is the working out of the marketplace? You have concentrated your reply in the context of Smithfield market. If it was the case that people said, "I would rather move to another location", does that not raise in your minds the wider issues that Mr Todd touched upon about the provision of wholesale market facilities in London against a substantially changed position? As you know, I had a role to play in the original relationship between Covent Garden Market and Spitalfields in trying to sort out a sensible accommodation. But the world has moved on. The dominance of supermarkets is even greater. But there is a change, as has become evident from the evidence we have heard, in terms of the one-stop shop reflecting the substantial growth within London of the catering market which has different demands from those which existed 10 years ago. The message that I get is that you are objecting to diversification because you want to hang on to the status quo. But on the other hand, the market out there is changing. What detailed studies have you done to look at the implications of the changed requirements of the wholesale market to supply networks in London, to see whether your existing group of markets and the wider group of markets in London are actually meeting that need in the best possible way? That seems to be the central issue in all this. I see that Dr Mann nods and I am pleased with that. His body language is very helpful.
(Mr Adams) The position is that we have not done a formal survey of what is going on throughout London. We have to work with what we have. We are faced with a market where we have seen traders going out of business and the amount of trade reducing. To encourage any further reduction would not be in our interests as far as the market is concerned under the restrictions that we currently have to work. The Corporation is not averse to competition as such. What we are saying is that the competition should be fair. As a commercial organisation, we might wish to move our site, shut it down because it is not paying or whatever. But we do not have that luxury. We are stuck with legislation which requires us to maintain the markets there. The point we are making as far as Covent Garden is concerned, is that we accepted in 1988, when we moved Spitalfields, that the actions of one market could have detrimental effects on another. We did not actually expand when we moved to Spitalfields. We replaced the space that we had at Spitalfields, which was at Stratford, as you will recall. We agreed with New Covent Garden that we would not expand the facilities we had at Spitalfields beyond what was necessary to rehouse the people that we wanted to move and also we accepted restrictions on the amounts we could charge by way of rents and so on. That comes back to us working out what our legal position is. It is not a statutory right that we were seeking to protect and it was not a statutory right that New Covent Garden market was claiming was being breached when we moved to Spitalfields from Bishopsgate to a point even further away, nine miles away at Leyton. We accepted that it was, to use an expression I used earlier, part of the public service we provide to London. It was on that basis that we accepted that we would not be trying to increase the capacity of markets but we gave the undertaking: "The Corporation accepts the general principle that it is constructing a replacement market and this is not intended to lead to an increase in effective capacity of London's horticultural wholesale markets". If we were in the competitive world, we would say, "We are going to build something bigger and better and we will attract everybody and if the people come from New Covent Garden, I am sorry but they had that choice. They could have done it if they had the money or the power and so on". We did not do that. At the moment, unfortunately, the suggestion that we had put to the Ministry, quite informally, at the beginning of last year was that perhaps the whole of London's wholesale markets should be looked at by somebody who was sitting above them all and not interested in any one site. That has not happened and in the absence of that, we, the Corporation, have been looking after the three markets that we are statutorily obliged to look after.