Select Committee on Culture, Media and Sport Minutes of Evidence



Examination of witnesses (Questions 680 - 704)

TUESDAY 6 FEBRUARY 2001

THE RT HON CHRIS SMITH and MR JON ZEFF

  680. At that meeting with Mr Bates, in return for the £20 million, did you agree that Wembley would enjoy relaxation of the marketing rights at the ground, in particular with relation to naming rights in and around sponsorship, naming rights in around the ground?
  (Mr Chris Smith) No.

  681. You did not subsequently confirm that decision in a letter to the Chairman of the FA or to the Chairman of WNSL?
  (Mr Chris Smith) No, what I confirmed in writing to all the parties concerned was the agreement for the return of £20 million.

  682. Are you concerned that it now looks as though opinion has hardened on the board of WNSL and there is a very good chance that they will not be paid the £20 million?
  (Mr Chris Smith) The latest information that I have from the Chairman of WNSL is that they stand by the commitment to return the £20 million that they made.

  683. Has anything been paid yet?
  (Mr Chris Smith) No, because certainly it was not envisaged in the agreement that it would be yet paid.

  684. I thought £3 million was supposed to have been repaid in 2000?
  (Mr Chris Smith) I would need to check the agreement but it was as the money began to come in to WNSL and the Football Association from the onward sale of some of the corporate facilities at the ground.

  685. It does not look very likely at the moment, does it?
  (Mr Chris Smith) That was the basis on which the agreement was reached.

  686. If you would just indulge me for a moment, Chairman. That is the first tranche, the £20 million. The second tranche is the £40 million which is the return the Lottery is supposed to supply, and we will not rehearse the arguments about the athletics, and the warm-up track. Where is the further £35 million conservative estimate going to come from?
  (Mr Chris Smith) It is a matter entirely for debate at the moment as to whether the £90 to 95 million approximate figure is an accurate figure. We will know a lot more as soon as the feasibility work that is currently under way is done.

  687. Have you ever known of a major feasibility study where costs do not subsequently go up afterwards?
  (Mr Chris Smith) I am aware of quite a number of stadia that have been constructed around the country in the course of the last five years which have seat for seat been considerably cheaper than the £90 to 95 million which is currently on paper. However, in addition to the £60 million which has been in principle committed by Sport England, there are further sums which have been committed by both the Lee Valley Authority themselves and by the UK Sports Institute for the ongoing centre of excellence work at the ground. There is a lot of work currently under way by the Borough of Enfield, together with companies in the private sector, to seek private sector support. I gather that those discussions are very encouraging. Everyone involved in both the borough and the Lee Valley Authority is confident that the funds needed to build the stadium will be found.

  688. If Sport England and the Sport England Board was to turn around at the end of all this and say it does not offer value for money, it is not the right place, it is not the right site, there is not a long term structure in place to finance the stadium, and they refuse to pay the grant to the Board, what would you do then?
  (Mr Chris Smith) Obviously they would have a right to take that decision because they are an independent body. However, I would certainly very much hope that they would not seek to do so.

  689. You are basically putting as much pressure on them as you possibly can?
  (Mr Chris Smith) I have urged them publicly and privately that I hope they will take into account both the value of the 2005 championships for the nation and also the importance of the legacy for athletics but those are decisions which ultimately are for them to take.

  690. Even though you had consistently over the past year been giving everyone the impression that it was a done deal?
  (Mr Chris Smith) I rely on the in principle support that they have given. That is valuable support and they have indicated to me on quite a number of occasions that they hope to be able to stand by that.

  691. Finally, Chairman, you said also in Sunday Business a couple of days ago "Obviously there is a General Election between now and then and that might change my position a bit". What did you mean by that?
  (Mr Chris Smith) Well, the fairly obvious point that has to be made is that the outcome of a General Election is not a foregone conclusion, Chairman. I would not wish anyone to think that it was.

  Chairman: That is the first time I have disagreed with you, Secretary of State.

Ms Ward

  692. Secretary of State, my apologies for being late and I hope you have not already dealt with this issue. The process by which the Lottery operator was selected for a second term was ultimately a bit of a shambles with the delay and with the problems of announcements and court action and all of that. It certainly would not have been what, I am sure, either of us would have wanted to see. Given that, you made comments at different points during that process and yet did not make comments at other points of the process. What do you consider to be your role in now reviewing that process?
  (Mr Chris Smith) Well, I have already touched on some of this in answers to previous questions, but certainly the process that was gone through was not the smoothest of operations. I think there are obviously some lessons to be learned from this. I do think that it is sensible to review the process to see whether changes are required. That review is one that I would not wish to rush in to because I think we need to make absolutely sure that the new franchise is absolutely signed and sealed and everyone knows exactly what is going to happen when. Once that is all known, then I think that will be the time to establish a review to look in detail at what happened, why things went wrong where they did and also to talk with everyone who was involved in the process, both the regulators and the bidding organisations, to see what recommendations they have as well. I am sure the deliberations of this Committee will also form a major part of any such consideration.

  693. Do you accept that in making comments in support of the Commission on their first decision, and not making comments after the second decision, may have been unhelpful?
  (Mr Chris Smith) No, the comment that I made the first time around was in relation to the decision which the Commission took that they were unable to award the franchise to either of the two operators. In the case of Camelot because they were worried about the propriety issues in relation to GTech. In the case of The People's Lottery application, because they were worried about the protection of players and the financing of the bid. Now in those circumstances they had taken the decision to say publicly that they were unable to appoint either of the two operators. At that stage I did say that I welcomed the robust way in which they had examined both of those two applications. That I think was an entirely legitimate thing to say. What we now know, of course, is that the concomitant decision that they took, which was to commence detailed negotiations with only one of the two bidders, was not a sensible and right decision. The Court made its judgment on that. It was not up to me to make a comment on any decision that the court had made because I would not seek to question the judicial process.

  694. Do you think you should now review the membership of the Commission?
  (Mr Chris Smith) The membership of the Commission I think proved themselves during the course of the consideration that they gave in November and December as to the two bids that were in front of them. They reached a decision, which has now been accepted by all parties involved. They clearly have strong leadership in the form of Lord Burns. It may well be that members of the Commission themselves will decide that they have had a good stint and want to stand down in due course, that is a matter entirely up to them.

  695. In the future, if with a new operator there might be issues of public concern, perhaps the sort of problems we have faced in the past, would you consider it to be your role as Secretary of State to make public comment and to intervene or do you now think this is purely a matter for the Commission and the chair of the Commission?
  (Mr Chris Smith) On the whole, of course, it will be very much up to the Commission to make decisions and to monitor exactly how the operator is going about putting the new franchise in place than operating it. If at any stage there is a question about the actions of the Commission then of course it would be a matter for me to consider because ultimately the Commission are answerable to me for the propriety with which they go about doing their job. At present I see no reason to intervene in that way.

  696. In relation to what I understand to be an application by The People's Lottery for some form of compensation for their bid, do you have a comment on that?
  (Mr Chris Smith) That is entirely a matter for the Commission to make a decision on.

  697. You will certainly not be providing any additional funding to the Commission to be able to deal with that matter?
  (Mr Chris Smith) No, that is a matter entirely for the Commission.

  698. But the Commission clearly will have a decision to make and as you just said the Commission are responsible to you ultimately. Surely you would be willing to comment at some point?
  (Mr Chris Smith) I have every confidence in the ability of the Commission to come to a sage judgment on that matter.

Chairman

  699. On these questions of regulation, has it not emerged, Secretary of State, that every formal regulation, however well intentioned, is seriously vulnerable? The previous Government when it set up the Lottery created Oflot and appointed Mr Davis. They did that from the best of intentions, they did not want themselves to be involved in any major decisions about the Lottery once legislation had been passed. That was found to be seriously vulnerable. This Government then changed it by creating the Lottery Commission. It has emerged from questioning this afternoon, that turned out to be seriously vulnerable, without any reflection whatsoever on the integrity of anybody on the Commission. The Commission clearly made a very bad mess of that, which resulted in the litigation which resulted in the resignation of one of the revolving Chairman/woman and the arrival of Lord Burns who did a very, very good job as professional trouble shooter but made it reasonably clear to this Committee that he intends to move on after a decent interval. He will do a year and then go. If one looks at other forms of regulation, the ITC made an appalling mess of the whole News at Ten issue which has resulted in not only a mess on the news on television on Channel 3 but also a mess on the news on television on Channel 1. That is the result of regulation. If one looks at the British Museum and the admitted mess over the South Portico and Portland Stone versus French stone, that was done with the best of intentions by the trustees of the British Museum, another form of regulation. If one does not have to, and I would not in any case, cast any reflection whatever on the integrity of any people involved in all these decisions, they have been seriously flawed decisions which in some cases have been adverse to the interests of the taxpayer. Clearly this is a very, very difficult problem because governments of both political parties have found themselves assailed with difficulties as a result. Is it your belief that we need to assess this whole business of regulation because if you get an effective regulator, as clearly in the case of Lord Burns you got in the end, things work well, but if you do not get effective regulators, as appears to be the case in all of the other examples I have quoted, then you can be in a lot of trouble and, although the regulators have the job, the Government of the day of whatever party is in power in the end carries the can.
  (Mr Chris Smith) You touch, Chairman, as you say, on a very difficult issue about what the best format of regulation is likely to be. You are always going to have areas of public life, areas of public service, where you require regulation of some shape or form, so the issue is how best to deliver that regulation. The two models that have tended to be in place up to now, either the single person regulator or the board of non-executive lay people regulator, have both in some cases delivered effective regulation, in some cases have not delivered effective regulation. I think we need to give some careful thought particularly in relation to another inquiry that you are conducting at the moment in relation to the precise structure of OFCOM into how to get that structure right. In relation to the National Lottery Commission I would say, however, that they made one very major mistake, they made it in good faith,—

  700. Is that not the worst kind of mistake? A mistake made in ill faith for personal gain at least has got that motivation but decent people who are not up to their job, that is a very different matter.
  (Mr Chris Smith) Far be it for me to suggest to any regulator that they should make decisions in ill faith. They made one serious mistake which, of course, the court then subsequently rectified. I think it would be foolish for us to assume from that that the entire nature of such a regulatory body is bound to be disastrous. I think we need to look very coolly and carefully at what works and where and why and whether it is very specifically a case of getting the right people rather than the right structure, or whether structures being got right can help you to get the whole nature of regulation right as well.

  701. Would they not be assisted, whatever form you get, if we in this country were to adopt the practices they have in the United States of transparency? We have an extraordinary culture of secrecy in this country in which a very great number of major decisions, in which people are interested, are taken behind closed doors. When this Select Committee a couple of months ago visited the United States to meet a number of lotteries, we were told, for example, by the Lottery Commission in Maryland, who run a very successful lottery, that all the meetings of the Lottery Commission there are held in public, on the record, with members of the public able to attend and the press there. Why can we not encourage, or indeed require, except when matters of serious commercial confidentiality are being discussed, these regulatory bodies, whether it is the Lottery Commission, whether it is the ITC, whether it is—God help us—the BBC Board of Governors, to meet in public? After all, the public finances all of this. The Government that has introduced the Freedom of Information Act, should it not now in these reviews you are talking about bring in a culture of transparency so that people can actually see for themselves the decisions being made in their names?
  (Mr Chris Smith) The first thing to say, Chairman, is from my recollection of the Freedom of Information Act, I think quite a number of these bodies do themselves fall under the Freedom of Information Act and, therefore, there is access to certain numbers of documents. Secondly, there are a number of regulatory bodies that have already, with my encouragement, taken steps towards greater openness. A very good example is the Radio Authority which is now much more open about the decisions it takes, the discussion leading up to those decisions, the publication of minutes and such like, than they were in the past. There are clearly some issues, particularly where regulation is occurring in a very sensitive commercial market, where issues of commercial confidentiality will inevitably mean that there has to be some private discussion. The progress that could be made towards greater openness is certainly something that I would welcome.

  702. We have held discussions, and for example Mr Wyatt referred to the competing merits of GTech and AWI, with GTech and AWI, we have held discussions with the Lottery people, all of whom made no requirement whatever of confidentiality about the competing merits of these two. We came down pretty well on the side of GTech even though AWI gave a dazzlingly brilliant presentation compared with the one by GTech. I simply do not understand why the behind the net curtains, not in front of the children ethos prevails in this country. Mr Faber has been talking about the proceedings of the Lottery Commission and, apart from any matters of commercial confidentiality, I cannot see why the discussions of the Lottery Commission should not have taken place in public and why they should not have been televised; in another country they would have been.
  (Mr Chris Smith) Of course, the Maryland example might not be an absolute analogy because of the fact that the lottery was not itself being run eventually by a private company.

  703. A-ha, but I made that point to you already.
  (Mr Chris Smith) In relation to the discussions of the Lottery Commission I would certainly hope that as much as possible that was not necessary to be kept confidential as a result of commercial reasons could be made available and open to the public. Indeed, it is also worth bearing in mind that the Commission is required by law to publish a full statement of reasons for any decision that it makes and it has to set out the thinking that led it to make the conclusions that it did. So there is some element of openness there at the moment. I would certainly encourage them to go further than that.

  704. Secretary of State, I could go on forever, not just about this, but the whole question of additionality, about the distributing bodies which Mr Faber talked about, but we have kept you here a very long time and it is time we finished and had a cup of tea. I thank you and Mr Zeff very much indeed for coming here this afternoon. We shall be seeing you again quite soon.
  (Mr Chris Smith) Thank you.


 
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