Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 120-139)

WEDNESDAY 15 NOVEMBER 2000

MR ROBIN YOUNG, MR M O'CONNOR AND MR D JAMES

  120. Who appointed them?
  (Mr James) The board of NMEC, as I understand it[15].

  121. Was a Mr Ben Evans appointed one?
  (Mr James) Mr Ben Evans was indeed associated with the project at that time, yes.

  122. What was his qualification?
  (Mr James) I am unaware. He had gone long before I arrived on the scene. I have never thought to ask that question, so I cannot answer you.

  123. Would Mr Young have any idea of appointments at that period in the development of the Dome?
  (Mr Young) I met Ben Evans but do not know what he was doing before.

  Mr Burns: I understand he was basically a Labour Party official and it just seems an odd qualification for being a content editor of one of the zones. Obviously I shall leave that because clearly none of you are familiar at that level.

Mr Love

  124. Can I refer you to figure 1 on page 7 which I am sure you will know explains the responsibilities and accountabilities of the different organisations: three bodies, three different accounting officers, two Ministers involved. Coming in as you have in September, do you think that is an ideal structure for such a delivery vehicle? Would you agree that it is perhaps a little complex and perhaps somewhat confusing?
  (Mr James) I would agree yes to every one of your points.

  125. May I take you on then in relation to the comments which are made in the report about the confusion which existed between the formal communication between these bodies and some of the informal dialogues which seemed to have gone on? The report talks for example about the board taking solaces and assurances from parliamentary statements that were made. Indeed it sought protection, according to page 34, section 2.14 of the 1996 Insolvency Act, of which I am sure you are aware. Do you think that did not lead to the sort of decisive actions that we needed if we were going to deliver this project on time and carry it through to completion?
  (Mr James) It is a very specific question. I shall give you a very specific answer. I believe, as you have drawn attention to the chart on page 7, we could say that this is indeed a reflection of the point made as early as paragraph 2 of the NAO report, that there is a problem of structure. You have drawn attention to the fact that there are three accounting officers involved in this. There is no such thing as an accounting officer in the world of a conventional or Companies Act company trading on the Stock Exchange and yet here we have three accounting relationships. If I were to put an overall assessment to somebody who was a foreigner to this field, overall I should say that what you are looking at on page 7, is a Companies Act company which is suffering from the split personality of being a demi-quango as well. That is an unavoidable consequence of this. I do not see, however, how it could have been otherwise, given the responsibilities of the Government departments which set out to create it. They have been asked to fulfil a political vision. They cannot do that and then abandon their responsibilities for accountability. They have to find a way of making accountability work within a structure which also has to be an independent company, with the consequences of the Solvency Act and of the Companies Act around its neck. This unfortunate structure is all that they could arrive at as a formula. I am very sympathetic to everybody's position. It is something which could not have been avoided, but it is very, very hard to live with.

  126. I gather from previous responses you have made that you have read through all of the minutes of all of the bodies and you have traced through all of the activities. Was there any discussion at any time about the possibility of this type of structure not being, recognising that the accountabilities had to be there, appropriate and action taken to try to overcome the confusion which may have existed?
  (Mr James) Yes. This was introduced as a consequence of the failure to achieve the original objective which was to get the whole project contracted out to the commercial sector, but the commercial sector did not accept the invitation. As a consequence, the departments concerned mandated to create and fulfil the dream of the Dome celebration and the millennium celebration found themselves progressively having to buy, in the case of the Commission, a company from Imagination which had been initiated with a view to setting up the commercial concept. Having bought it you are on the slippery slope which leads to the structure, because you now have the means of creating the structure for a Dome company. Now you have to put a board in place to run it, then you have to separate it to the point where it becomes subject to the Companies Act. Nobody at that time was thinking of the Solvency Act because nobody ever believes that will become an issue. You also have to have a financier. Private capital said no it would not apply. The Commission therefore has got itself inadvertently into a position where to fulfil the political dream it has become the quasi-banker to a company which is not quite a quango and not quite an independent PLC.

  127. I think the length of your reply explains the real difficulties which existed.
  (Mr James) I am sorry.

  128. I want to go onto the figures for visitor numbers. As both yourself and Mr O'Connor have explained, some quite considerable research and analysis was indeed carried out in reaching the figure of 12 million visitors. What I should like to do is ask you a very unfair question. If you had been involved with this project, at the time when that figure was brought forward, do you think you would have cast somewhat of a more critical eye than any of the different bodies had done over it?
  (Mr James) I would certainly have asked myself one very important question and that was whether I was taking a risk with shareholders' money which was justified in terms of the return that the Shareholder wanted. That is a very interesting question for you because in this particular case the shareholders' money is coming through from the lottery, effectively sponsored by the Government to use and the Government wants a given outcome. It wants a celebration and a Dome. I would have had to judge it not by the standards of a company listed on the Stock Exchange, but by a totally different set of criteria with which I am unfamiliar.

  129. What I was really trying to lead onto was that there is a terrible sneaking suspicion that that figure of 12 million actually created an overall financing of the Dome that would be acceptable to the public. If they had taken a much more ruthlessly realistic view, then the finances may have been such that people would have found it impossible to allow the project to go ahead. Would you accept that is a concern which people would have?
  (Mr James) It would be correct that the foundation budget would probably not have passed the due diligence required for a listing on the Stock Exchange. But this was not that. It was the means of fulfilling a political dream and as such it carried with it a reasonable prospect, by all the criteria available to those who had to judge, that it would be achieved.

  130. What you are saying is that if it had been in the private sector this would have been the overall, overriding priority to get those predictions of visitor numbers right, but because of other priorities it came much further down the priority list.
  (Mr James) I am saying that it was essentially recognised as having a risk element which might not have applied if you had been seeking to invite capital from the Stock Exchange.

  131. The report makes the point and you have all agreed it, that there is no comparator but the comparator has been made with various expos and I shall not go into the failure of the recent expo in Germany which I suspect is even greater than the failures at the Dome. It is interesting that when you sought round to bring in the expertise felt necessary for the Dome you turned to EuroDisney rather than to someone who had an expo background. Please explain that?
  (Mr James) Mr Gerbeau was an inspired choice and if we had not had him, I do not like to think where we should have got to with our numbers at the end. We needed somebody who knew how to handle large quantities of people moving in a relatively confined space and improve the access, which he did and the numbers have recovered. He was a natural choice for it. We were very lucky to get him.

  132. I understand that and I accept that. There is no criticism of Mr Gerbeau in this. There is a lot of talk in the report and you have reflected it here about the need to bring in that operational expertise. It should have been brought in at a much earlier stage. If it had been brought in, do you think Mr Gerbeau would have cast a more critical look at the 12 million figure?
  (Mr James) It needed somebody exactly like him, whether it was Mr Gerbeau or somebody it definitely did, and it needed them from some time around about the spring of 1999, because that would then have provided the time to put an overlay on other people's great enthusiasms and the great ideas they were trying to harness and would have put operational experience as an overlay.

  133. May I just take the experience of EuroDisney? As I understand it, it is reaching about 10 million visitors per year at the present time and we do know the considerable difficulties it went through in the early stages, which I believe required refinancing at one stage. With that experience behind him, do you think Mr Gerbeau or indeed anyone who had experience of that type of very large-scale activity would have been much more critical about the business plan on which the Millennium Dome was based?
  (Mr James) I believe he would have been; after all he made a number of changes at the time when he did arrive but these are essentially changes driven by operational experience and his eye for what makes customers come in.

  134. May I take you on to a point which was made earlier on by Mr Rendel which I just want to clarify? You indicated that two of the exhibits inside the Dome were actually funded directly by the private sector, which means that the overall expenditure figure of £793 million excludes that particular expenditure because it was taken on by others. Therefore can I seek your agreement to the view that the overspend on the original budget for the Dome is greater than is being expressed in this report?
  (Mr James) Not really. This is the difference between the number of zones which were planned and the number of zones which were built. We have actually ended up with two more zones than were originally intended and those are really represented by the money which was spent. At one stage it did go to 15 in the plan. It went 12, 15, 14.

  135. Recognising the difficulties which were already inherent in the scheme at that stage, was any consideration given to reducing by two the number that were being funded by the Dome itself in order to try to reduce the overall cost?
  (Mr James) The trim from 15 to 14 reflects that intention to control cost.

  136. But not any further.
  (Mr James) No, I do not believe so.

  137. You mentioned the hard-pressed finance director and staff. There is quite a lot of evidence from this report that the whole team in finance in the Dome was under-resourced. Would you agree with that and if you had been there at the beginning would that have been an issue you would have highlighted?
  (Mr James) Yes. I think though that I have said separately that I would have gone down a different course of action. I would have had a resident executive finance team on site, but I would probably have contracted out the financial management of such things as the bought ledger to a major firm of accountants on the grounds that that would then have been a flexible cost that could move up, such as at key periods in the last quarter when the pressure was appalling. I would probably have lived with a small team but a greater reliance on external outsourcing for some skills.

  138. I accept the need for external skills, but in the report it details that on two occasions outside consultants were brought in and indeed one of them was brought in when you first became involved.
  (Mr James) Yes, but not to run the system. I would actually have had them come in and run the bought ledger during that time for control.

  139. I understand that. The reality is that those outside organisations were brought in implicitly because the finance function was failing to keep on top of the issue that it should have been on top of. Therefore the question I ask is: would it not have been much more sensible for them to have strengthened the finance team in order that that would not have been necessary, that the board and indeed all the others involved in the Dome would have been fully aware of the financial situation and how they were going to carry that forward?
  (Mr James) It is a view I would support. May I make a comment about the general financial control system because it is a question which has not been asked but it is very important here? The report says that there is a weakness of the controls and the financial management here. The view that I and my colleagues who have come in with me to take control of this from September have is that the systems were actually quite good with two major exceptions. There was a failure to provide for an adequate integrated financial model and there was a failure on the accruals system, but the actual system for the bought ledger otherwise was pretty good and the other systems were sound. They just got overwhelmed by what you have seen, that £132 million flooding through in terms of invoices coming in in that three-month period at the end of last year.


15   Note by Witness: The appointment of contract editors fell within the Chief Executive's delegation from the Board. They were, therefore, appointed by the Chief Executive. Back


 
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