Select Committee on Culture, Media and Sport Minutes of Evidence


Supplementary memorandum submitted by Sport England

1.  WHAT IS SPORT ENGLAND'S ASSESSMENT OF THE STATUS OF THE WEMBLEY STADIUM PROJECT AT THE END OF JANUARY 2001?

Financing issues

  1.1  Since December, there have been several developments in respect of Wembley.

  1.2  First, the Football Association and Wembley National Stadium Limited announced, on 8 December, a delay in the project's financing process to let them address a number of issues that had been raised by potential funders during discussions with the banks. Furthermore, they announced a review of options for the project in order to determine the best way forward.

  1.3  Subsequently, on 22 December, the Football Association announced some changes to the WNSL board—including Sir Rodney Walker's promotion from board member to Chairman. In addition, it indicated that its senior officials, including its Chief Executive (Adam Crozier), would, in future, take a closer interest in the Wembley project.

  1.4  Since December, the FA and WNSL have been working with Chase Manhattan plc (which has the lead responsibility for arranging financing for the project) to address the issues raised by potential funders.

  1.5  On 1 February, WNSL and the FA announced that, following a comprehensive review, they were confident that funding for the project would be forthcoming, based on the existing concept and an updated business plan, to be released to potential funders in April. While a considerable amount of work remains to be done, it is likely that the revised proposals will include:

    (i)  an increased financial contribution from the FA;

    (ii)  a review of the potential for any cost savings; and

    (iii)  a new timetable, based on starting on-site this summer and the new stadium opening in December 2004.

Athletics at Wembley

  1.6  In our last submission on this subject, we summarised the changes that were being made to the original Lottery Funding Agreement (LFA). These alterations had been necessitated by:

    (i)  the FA/WNSL's agreement with the Secretary of State, originally reached on 22 December 1999 to pay £20 million to Sport England in return for the removal of the obligation to stage athletics (including the World Athletics Championships) at Wembley; and

    (ii)  the FA/WNSL's request, in the light of this agreement to have this obligation formally removed from the Lottery Funding Agreement.

  1.7  Following a period in which the terms of the original agreement between the FA/WNSL and the Secretary of State were clarified, we undertook a two-stage consultation process in which, among others, the DCMS and UK Athletics confirmed that they no longer wanted to see athletics events staged at Wembley. Sport England's Council members then agreed to the FA/WNSL request in relation to athletics.

  1.8  Accordingly, there was a basis, in December, on which all interested parties could move forward. There was agreement that (i) the athletics obligation should be removed from Wembley and (ii) Sport England should receive a £20 million payment from FA/WNSL, to be paid over a five-year period to December 2004.

  1.9  However, following the review announced by the FA in December, WNSL decided to embark on a formal reappraisal, led by Sir Rodney Walker, of Wembley's potential to accommodate athletics. This issue was discussed at Sport England's Council meeting on 8 January, and the organisation's Chief Executive duly wrote to WBSL seeking a clarification of its intentions.

  1.10  Sir Rodney announced, on 18 January, that the World Athletics Championships would not take place at Wembley. While it was feasible to host athletics at Wembley, he could not guarantee that the stadium and its ancillary facilities would be ready in time to stage the 2005 Championships. However, he indicated that Wembley should host athletics events further into the future. As he stated: "the new Wembley Stadium has a design life of fifty years and in all likelihood will be the National Stadium for longer than that. If it is to be a true national stadium I believe it has to have the ability to host major athletics events, in particular the track and field events of any potential London Olympic Games, during that time".

  1.11  The willingness of the FA/WNSL to pay £20 million to Sport England (see paragraph 1.6i) had been made clear during the negotiations over the amendment of their Lottery Funding Agreement with Sport England.

  1.12  However, the changes to the LFA have yet to be formally made and, following Sir Rodney's announcement of 18 January, we have yet to receive clarification of WNSL's intentions in respect of athletics events beyond 2005.

  1.13  In view of the Council's previously expressed opinions on this subject, WNSL was asked, by Sport England, to clarify two outstanding points:

    (i)  the design solution which WNSL planned to use to ensure that the new Wembley stadium could host athletics events in the future; and

    (ii)  WNSL's plans to return £20 million to Sport England, in accordance with its agreement with the Secretary of State and its submitted request to amend the Lottery Funding Agreement.

  1.14  Discussions are continuing between Sport England and WNSL, but no definitive answers on these points have yet been arrived at.

Conclusion

  1.15  In discharging our responsibilities as a distributor of Lottery funds, we have two principal objectives (i) to facilitate the English National Stadium project at Wembley and (ii) to ensure that the grant of £120 million is adequately protected. We welcome, therefore, the announcement by the FA and WNSL, on 1 February, that a new timetable has been set and that, with an increased financial commitment from the FA, there is an improved prospect of the funding for the project being raised to enable work to begin on-site this summer.

  1.16  We will continue to monitor developments closely, in terms of (i) the financing package and (ii) the planning design, and construction process, to ensure that WNSL and the FA, as recipients of Lottery funding, comply with the terms of the Lottery Funding Agreement.

  1.17  Sport England has had no desire to complicate the financing process and has not, therefore, pressed for the immediate payment of the first instalment of the agreed £20 million sum. However, we are conscious that this money is necessary to minimise the size of the likely funding gap in respect of Picketts Lock.

  1.18  Throughout a period of uncertainty, Sport England has been—and remains—fully committed to the development of the new national stadium at Wembley. We hope that WNSL will secure the finance they need to ensure that work can start on site in the near future.

2.  What is the current funding commitment of Sport England to the Crystal Palace National Sports Centre, and what is its expected future beyond 2004 in the light of the proposed development of Picketts Lock?

  2.1  In November 1999, Sport England's Lottery Panel rejected the London Borough of Bromley's bid for £32 million of Lottery money to help fund a major redevelopment of the National Sports Centre at Crystal Palace. In reaching their decision, Panel members were conscious that Bromley's proposals would have involved the Lottery meeting the vast majority of the project's costs—with only a small proportion of the capital funding, and no revenue funding, coming from the Borough itself.

  2.3  Since then, Sport England has continued to discuss Crystal Palace's future with the main interested parties—including Bromley, the Amateur Swimming Association and UK Athletics—with the intention of arriving at a consensus on the best way forward for this important facility.

  2.2  The Panel recently considered revised proposals for a combination of community and high performance facilities at Crystal Palace, and agreed, in principle, to fund a new scheme.

  2.4  Although no final decisions have been taken, and no funding has been committed, we envisage that Crystal Palace will continue to be a high quality training facility, serving the southern part of the London region. However, it is harder to decide upon its future as a competition venue for athletics, as this issue can only be resolved once the future of Picketts Lock is clearer.

  2.5  As members of our Council have stressed, they cannot make an informed decision on the proposed Picketts Lock development until they have received the consultants' reports (expected in the Spring) on its likely technical feasibility and economic viability. They have also emphasised that, in assessing any Lottery application in respect of Picketts Lock, they will want to consider the issues "in the round". As well as analysing the application itself (on the basis of the usual Lottery criteria), they will take account of its implications of existing athletics stadia across the country. The views of Gateshead, for example, have been brought to the Committee's attention in a separate submission.

  2.6  We are also conscious of our commitments to Crystal Palace under the terms of the lease that lasts until 2004 and we will ensure that this, too, is taken into account in the decision-making process.

  2.7  We will keep the Committee informed of Sport England's decisions in respect of both Crystal Palace and Picketts Lock.

3.  Has Sport England considered underwriting sporting events in the same way as The Sports Council for Wales and, if it has not adopted that approach, why not?

  3.1  Sport England would be acting outside its statutory powers as a Lottery distributor and its Financial Memorandum if it underwrote sporting events. However, while we cannot support any event in such an open-ended manner, we can—and do—give specific grants to a number of different events.

  3.2  This happens relatively infrequently, because UK Sport has the prime responsibility for helping to fund sporting events. Nevertheless, there are occasions when it is appropriate for Sport England to fund events—for example, those which are linked closely to other Sport England-supported programmes or capital projects.

  3.3  Under the current division of responsibilities between the Sports Councils, Sport England's key role is not directly to attract sporting events to this country, but to ensure that such events generate the best possible sporting legacy—in terms of both improved facilities and increased participation rates.

4.  What scrutiny has Sport England undertaken of operational plans for the 2005 World Athletics Championships, including the business plan and proposed organisational structure? What is the timetable for consideration of a Lottery bid for this event and what commitments have so far been given relating to support for running costs for the event?

  4.1  The London 2005 Bid Committee (established by UK Athletics) prepared a business plan for the 2005 World Athletics Championships before submitting its event bid to the International Amateur Athletic Federation.

  4.2  The Committee commissioned financial consultants to help with the preparation of this plan, which included:

    (i)  operating cost projects, including: stadium hire costs; transport costs; event administration; marketing and promotion; and allowances for unforeseen contingencies; and

    (ii)  income projections including: ticket revenues; and local sponsorship opportunities. Under the event staging agreement with the IAAF, all other event revenues would remain with the Federation.

  4.3  The plan suggested that the costs associated with staging the World Athletics Championships would exceed the income they were likely to generate by some £15 million. This calculation:

    (i)  excluded the costs of providing the stadium, warm-up facilities and athletes' village. Such costs, it was assumed, would be met through other sources; and

    (ii)  assumed that the Championships would be staged at Wembley. They would, therefore involve:

      (a)  a single athletes' village;

      (b)  high levels of potential ticket revenue, as a result of Wembley's large capacity; and

      (c)  the Championships benefiting—as a result of the Lottery Funding Agreement between Sport England and WNSL—from the new stadium's ability to generate high levels of income from premium seats and banqueting.

  4.4  Sport England did not make any formal commitment to help meet the running costs of the 2005 Championships. However, its Lottery Panel did make, in October 1998, an "in principle" budget allocation (of up to £15 million), dependent on the prevailing budgetary pressures at the time of any application being made, in the expectation of UK Athletics asking for support to help stage this event. The factors behind this decision included:

    (i)  the Panel's desire to see the country stage the Championships, for the first time, and thus improve the country's chances of attracting other major sporting events in the future; and

    (ii)  the likely shortfall identified within the Bid Committee's business plan.

  4.5  As it became increasingly clear, in 1999, that the 2005 bid had a good chance of succeeding, Sport England commissioned Grant Thornton to assess the business plan. Their conclusions suggested that it seemed sound, with income and expenditure projections which appeared realistic at that (early) stage.

  4.6  The key findings of the Grant Thornton report were passed on to the Chief Executive of UK Athletics and the 2005 Bid Committee, to provide them with guidance on how their business plan should be developed in the event of the bid to the IAAF proving successful.

  4.7  However, the business plan now needs to be revised to take account of the fact that, as Sir Rodney Walker stated on 18 January, Picketts Lock has been identified as the London location for the 2005 World Athletics Championships. As a result, the updated plan needs to take account of the change from Wembley to Picketts Lock, and the associated capacity income stream-related issues.

  4.8  Sport England is expecting to receive, in the spring, an application for financial support for the 2005 Championships. As usual, this will be assessed against the criteria that we are obliged to employ through the Financial Directions that we receive as a Lottery distributor. They include viability, value for money, eligibility and financial need.

  4.9  In the meantime, we have provided UK Athletics with guidance on the application process and informed them that the success of any funding bid will also depend on:

    (i)  the outcomes of the Picketts Lock feasibility studies;

    (ii)  a staging agreement being agreed between and signed by representatives of the IAAF, UK Athletics (as the host Federation) and the host city; and

    (iii)  the creation of an organisational structure capable of delivering the 2005 Championships in a successful and financially sound way. Without such a structure, the IAAF would, in any case, decline to sign the staging agreement.

5.  Is Sport England satisfied that all capital projects for the 2002 Manchester Commonwealth Games are on time and on budget?

  5.1  In line with its agreement with Manchester City Council, Sport England has concentrated entirely on helping to fund the facilities that will be used during the Games, and by the community thereafter. Under the same agreement, Manchester City Council is responsible for the successful operation of the Games themselves.

  5.2  Having worked closely and constructively with Manchester City Council and our other partners, we believe that good progress has been made with the construction of the facilities which, thanks largely to Lottery funding, will help to host the 2002 Games. For example:

    (i)  the Aquatics Centre was formally opened in October 2000;

    (ii)  the Bolton Arena (which will host the badminton competitions) will be complete in the spring;

    (iii)  the National Shooting Centre (at Bisley) is due to be completed this summer; and

    (iv)  other facilities, such as the Velodrome, have long been operational.

  5.3  The current position is summarised in the attached table.

  5.4  In the past, some concern has been expressed about the main stadium, and the fact that its scheduled completion date has always been relatively close to the opening of the Games themselves. Sport England's Chief Executive, Derek Casey, acknowledged this point in oral evidence to the Select Committee in April 1999.

  5.5  However, the City of Manchester Stadium remains on schedule for substantial completion by November and—following testing, commissioning and fitting out—it is due to be handed over to the Games company in March 2002.

  5.6  In common with the other largely Lottery-funded facilities that will be used during the Games, the Stadium is being delivered on schedule, within Sport England Lottery budgets, and in accordance with the terms of the relevant Lottery Funding Agreement.

  5.7  As previously indicated, the Games' Lottery-supported facilities have been developed on the basis that there will be a substantial post-2002 sporting legacy, in terms of both local community use and elite English Institute of Sport programmes. Furthermore, the Games' facilities will contribute to the revitalisation of previously deprived areas, and help to generate a substantial number of jobs. (Please see sections 2 and 3 of our original submission to the Committee).

6.  Is Sport England satisfied that all conditions attached to its funding of the 2006 FIFA World Cup bid were complied with in full by the Football Association?

  6.1  A number of conditions were attached, from the outset, to our financial support for the FA's 2006 World Cup bid. For example, the Lottery Funding Agreement made it clear that:

    (i)  the grant would be returned to Sport England in the event of the bid proving successful; and

    (ii)  Lottery money could be used only for certain specified purposes—and not for hospitality, for instance.

  6.2  We have subsequently monitored, carefully and consistently, how this money has been spent. For instance:

    (i)  we have exercised our rights—which were built into the Lottery Funding Agreement—to monitor the bid's progress and examine its expenditure, and thus ensure that Lottery money was being used in accordance with the rigorous terms agreed by Sport England and the Football Association; and

    (ii)  the Lottery award was paid, in instalments, only after satisfactory financial data had been received. (In fact the last payment, of £344,351, has yet to be sent to the Football Association, and will be paid only after Sport England has seen the final audited accounts).

  6.3  In 1999, in oral evidence to the Committee, we expressed confidence in the way that the 2006 bid team had been meeting all the relevant conditions of the LFA. Since then, our Lottery Compliance Team has continued to monitor the situation, and none of its audits has found any indication of Lottery proceeds being spent in an inappropriate manner.

  6.4  As previously indicated, we believe that the potential benefits of staging a football World Cup are so substantial—from both a sporting and an economic perspective—that it was right to give strong (if conditional) support to the 2006 bid. As the Committee has previously concluded, a successful bid would have provided "an enormous return".

7.  What is Sport England's assessment of the BOA's feasibility study on a London Olympic bid and what is Sport England's own estimate of the likely cost of developing facilities for a London Olympic Games?

  7.1  Sport England is keen to support a viable British Olympic bid. Accordingly, we have been looking forward to reading the British Olympic Association's feasibility study on the possibility of staging a future Olympic Games in London. (As the BOA has made clear, it believes that only a London-based bid would have a good chance of bringing the Olympics to Britain).

  7.2  The Chief Executive of Sport England, Derek Casey, wrote to his counterpart at the BOA (Simon Clegg) on 9 January, to ask for a copy of the feasibility study, so that we could respond to the Committee's request. However, in his reply (dated 23 January), Mr Clegg declined to make this document available to Sport England.

  7.3  Without this information from the BOA, we regret that we cannot provide the Committee with a meaningful estimate of the likely cost of developing (i) the sporting facilities identified as needed by the BOA or (ii) the associated infrastructure improvements that the BOA has identified as being necessary for a London-based Olympic Games.

Lottery-supported facility
Sport(s) to be hosted
Completion date
Post-games use?
Belle Vue Leisure Centre
Hockey
September 2001
Yes
Bolton Arena
Badminton
April 2001
Yes
Manchester Aquatics Centre
Diving, Swimming/synchronised swimming, Water polo
September 2000
Yes
Manchester Sportcity project

—  City of Manchester Stadium
Athletics finals
Opening and closing ceremonies
Rugby 7s
March 2002
Yes
—  National Cycling Centre
Track cycling
September 1994
Yes
—  Other facilities    
  Athletics Centre
Warm-up
March 2002
Yes
  Indoor Tennis Centre
Table tennis
March 2002
Yes
  National Squash Centre
Squash
March 2002
Yes
National Shooting Centre
Shooting
August 2001
Yes


February 2001


 
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