Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 60 - 79)

MONDAY 13 MAY 2002



60.  Fine, feel free to come back if you have any other matters. Before I call Derek Wyatt I would like to pursue one or two further matters that have emerged from Mr Doran's questions. I find all these financial factors very difficult to understand because they seem to be seriously contradictory to one another and they do not seem to stack up together. If we look at the Tropus report, on page 18 of the report we have got there in paragraph 7.1 that the original budget was established at £175 million, and then in the second sentence of that paragraph this was subsequently reduced to £140 million. In paragraph 7.2 it appears that the designs in response to the £140 million budget were considered "inappropriate" by WNSL due to the lack of back-of-house and other facilities and the budget restriction was lifted from all future design options from April 1999. Do I understand from that— because if I am wrong please do not hesitate to correct me—that after having had two budgets the decision was then made to spend as much as it took? It says the budget restriction was lifted. Does that mean that what happened was that the decision was made to go ahead with certain facilities and they would cost what they would cost?

  (Mr Cunnah) Mr Chairman, this is not wording that I would recognise although what I can do is talk you through that period. WNSL inherited the plans that were originally set up for the national stadium and I think the estimates at that time, without too much detailed design, were round about £200 million. The budget that is referred to of £140 million was the first attempt to see if that £200 million budget was in fact a realistic budget for a national stadium. What this actually showed was that, when the designers showed what that sort of money would buy, it was clearly inadequate as a national stadium, hence a fuller design for a more sophisticated stadium was then put together. The words "budget restriction was lifted" are inaccurate. It has always been tight budgeting in terms of making sure that we know exactly what we will be spending and what the business plan itself could afford.

61.  If you look at 7.3 it says that a realistic budget was never established by the WNSL senior management team and that there is no effective budgetary control and it was potentially a design which lacked the normal budgetary pressures and efficiencies. I find that quite extraordinary. I find it extraordinary that a huge project for a national stadium, or indeed anything else, should go ahead on the basis of what the Tropus report calls "no effective budgetary control" and in the "absence of normal budgetary pressures and efficiencies". So what control was there?

  (Mr Cunnah) Mr Chairman, I do not accept the allegations.

62.  You do not accept the allegations of the Tropus report?

  (Mr Cunnah) I do not accept this part of the report which says that there was no budgetary control. All through the project there has been a lot of work that has been done on the cost of the stadium and indeed the revenues that such a stadium would be likely to generate. That has been very necessary, of course, because the financial plan was always going to be presented to the banks and to the City and in order to achieve success in such a project of course the finances do need to hang together.

  Chairman: Okay.

Mr Doran

63.  Was there a project director or is there still a project director?

  (Mr Cunnah) At the moment I am Project Director. At that time there was both a Chief Executive and a Director of Construction.


64.  You talked a moment ago about money forthcoming from the banks and here I need to refer to the line of questioning that Mr Doran embarked upon in relation to whether you could go ahead in December and you said "yes provided the money was in place". Mr James in his letter of 17 December in paragraph 5.4[14] talked about the commitment of Barclays Bank to retaining their role as the lenders and that Sir Rodney Walker believed that the loss of Barclays would seriously discourage alternative bankers accepting the funding role. We are in private session so there is no point in footling around. The Secretary of State said last week that she had given you until 21 May 2002 to confirm that you had the money absolutely firmly committed. It is obviously not coming from Barclays Bank because Barclays Bank have stepped out, so what we need to know is will you have that money tied up in the stringent terms which the Secretary of State told me she would require by a week tomorrow?

  (Mr Cunnah) Mr Chairman, the documentation and the contracts that we have to do with the bank will take longer.

65.  Could you speak up, it is my fault, not yours.

  (Mr Cunnah) My apologies. The work that we have to do to complete the banking documentation and the contracts will take longer than 21 May.

66.  So you are absolutely confident that you will have the loan money in place by a week tomorrow? Oh, you are no longer confident?

  (Mr Cunnah) Mr Chairman, can I say that what we do have in place is an offer of finance from the bank.

67.  What does that mean?

  (Mr Cunnah) That means that at the moment we are talking about the detailed draft terms with the bank. The finance has been approved by their board.

68.  Which board, theirs or yours?

  (Mr Cunnah) Both. There is a firm intention from the bank to do the deal, but of course every deal needs to be properly documented and all of the contracts need to be fully in place.

69.  The Secretary of State says that she is going to make a statement to the House of Commons before the Spring Bank Holiday recess in which she says she is going to keep us further informed. Mr James, through no fault of his own, was quite extraordinarily misled in being led to say in the opening paragraph of his letter "the present, and we understand inflexible, deadline for a decision on Wembley . . ." which was two days before the Secretary of State's statement. The Secretary of State replied to a Private Notice Question put down by me last week that the 30 April deadline had been abandoned totally. What will happen if you have not got this loan money tied up by the time the Secretary of State is due to make a further statement to the House of Commons within what is now only a few days?

  (Mr Cunnah) Mr Chairman, the key thing is that the commercial deal between the banks, ourselves, the construction company and all other parties is still there and still hangs together. That deal will be there beyond 21 May and every party is now committed to completing the project according to a reasonable timescale.

70.  What do you mean "will be there"? Does that mean that the loan offer from the bank will not be withdrawn? Is that what you mean by "will be there"?

  (Mr Cunnah) Correct, it will not be withdrawn because we are working through from the offer that we have had from them to completion of all the contracts.

71.  Have either you or they got a final date by which this deal either will be tied up or will not be tied up? We have already passed by months the "inflexible" deadline which Mr James was misled into believing was in place.

  (Mr Cunnah) Mr Chairman, I think the so-called inflexible deadline related to the decision whether to proceed further with the project at that time. The deadline that was 30 April was an estimate from WNSL of the amount of time required in order to achieve all the different elements of the project that were outstanding as of December and indeed the decisions that were put in place at that time. We managed to achieve all of those conditions by 30 April but the financing was an offer in principle which is now being taken through to conclusion. It will take us some time to do that.

  Chairman: I have got a couple of other questions but first I will to ask Derek Wyatt and then John Thurso.

Derek Wyatt

72.  Do you mean that the heads of agreement will be signed on 21 May? What is the Secretary of State going to say on 21 May if there is nothing to report?

  (Mr Cunnah) I am sorry, I cannot speak for the Secretary of State.

73.  Let's get to a heads of agreement report then; have you signed that yet?

  (Mr Cunnah) We are in the process of doing that. I have come straight from an FA board meeting where we reviewed the terms. We have approved that and we are moving forward with those detailed negotiations at the moment.

74.  What is your anticipation? That sounds as though the contract is going to take at least six to eight more weeks to me. Is that unreasonable?

  (Mr Cunnah) We are very intent on doing this the right way and making sure everything is done properly. Your timescale is a reasonable estimate. It is a matter of weeks but we just need to make sure that we do everything that we need to do.

  Chairman: Incidentally, you may have talked about the WNSL deadline but the deadline of 30 April as far as we are concerned was the deadline to which the Secretary of State committed herself in an answer in the House of Commons on 10 April, a deadline which either she or you or both of you failed to meet. John?

John Thurso

75.  You have partly answered my question because we had the same question in mind. Just so I can get this straight, you have had an offer of finance which would have been subject to your board approval and on the other side the approval of the credit committee and their board and the approval will have had a number of conditions attached to it. It has been approved by your board and it has been approved by their credit committee and their board so you are working through the conditions. Can you say what those conditions are? Presumably there is due diligence involved?

  (Mr Cunnah) The due diligence has already largely been completed. If you would permit me, Mr Chairman, I do not think I should say what the conditions are because I think it is commercially sensitive.

76.  I am not asking you to give me the commercial terms in that sense. I am asking you to say what conditions presently have to be delivered before the bank will say this is an absolute offer?

  (Mr Cunnah) Very simply that all of the required contracts are in place.

77.  So once all of the required contracts are in place and the bank says that, you have got your money?

  (Mr Cunnah) Yes.

78.  Which contracts are not in place?

  (Mr Cunnah) The phrase "in place" means essentially needing to be reviewed and approved by the bank and their lawyers so all of the staging terms of the Football Association, the Football League, the Rugby Football League, for example, are all in place but need to be reviewed. There are many—

79.  Can I pick you up on that. When you say "in place", do you mean agreed between the parties and open for review by the bank?

  (Mr Cunnah) Correct.

14   See HC 843 (2001-02), Memorandum, which contains the report of the independent review undertaken by Mr David N James CBE and Berwin Leighton Paisner into the Wembley national stadium project (procurement process), together with a covering letter, dated 17 December 2001, from Mr James to Sir Rodney Walker, then Chairman of Wembley National Stadium Limited. The material was submitted to the Committee by WNSL and contains deletions discussed and agreed between WNSL and the Committee. Back

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