Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 360 - 379)



  360. I think the quotation in bold at the end of paragraph three states "There was a failure of corporate governance due to the . . ." and I am getting this wrong now, "inadequacy of the procurement process". You as the stewards of £120 million of Lottery money put that money in and the one thing that stood between successful completion of the project and otherwise was the procurement and building. So your one act of stewardship is really to ensure that the project goes ahead. You have representation there, you have employed specialists to help you. The criticism of Mr James and BLP could not possibly be more forthright as to the lack within WNSL but you did not spot that, or if you spotted it you chose to do nothing about it.

  (Mr Fytche) Could I perhaps answer that in two ways, first of all to look at monitoring procedures and then to look at the report that came forward from David James at the end of last year. Clearly under the Lottery Funding Agreement we are obliged to monitor the progress of the project against a whole series of milestones. Those milestones relate to design, they relate to planning and they obviously relate to procurement and the construction contract. It is very clear that we had a very clear involvement, as I think Mr McPeake said this morning, with regard to the development of the design of the brief and the appointment of the design team. Those processes were thorough and very clear and at this stage have resulted in a design which complies with the technical requirements in the Lottery Funding Agreement. With respect to milestones on planning and that sort of thing, again we were very keen to ensure that the project did secure planning consent following a very thorough evaluation of the prospect of securing consent prior to the grant being awarded. Consent has now been awarded and, again, on that score the robust nature of the Lottery funding has secured a way forward that is satisfactory to the Council. With respect to timescale, clearly everyone is aware of the delays to the project and Mr Carter in his report at the end of last year pointed the way to some of the factors that had led to that delay. We have monitored that carefully and the Council has considered monthly the delays to the project, the reasons for that and the reasonableness of the Council continuing to allow the project to proceed. We feel the project has now reached a stage where it is very close to securing the final test the Secretary of State set in December, that is the financing process, and it would be wrong at this stage to look at another project. We do feel that the steps the Council has taken in difficult circumstances to consider timescale, delays, will be vindicated with a successful outcome to this process. However, it is also clear, coming to the final part of the monitoring process, that in respect of construction procurement, whilst we were able to monitor adequately the strategy that was in place, ie the way that the contracts should be packaged, and indeed the Council not being satisfied that they were packaged in the right way stopped paying grant for a number of months, it is also clear from the James Report that there is a whole range of issues about the practices within WNSL which we were not aware of. Clearly that is a serious issue, it is one that we have taken very seriously, which brings me to—


  361. Why were you not aware of it? Why were you not monitoring it?
  (Mr Fytche) It brings me to the second part of my answer, Chairman, which relates to the David James Report itself which highlights the range of deficiencies which were talked about earlier this morning. At that stage obviously we sat down with all the stakeholders involved in December and had to reach decisions about what the future should hold for the project. In full consultation with the Secretary of State and the Carter review team, and obviously with the project partners, we put in place a whole series of monitoring regimes to address any deficiencies that were around at that time. So we have monitored thoroughly over the last few months the corporate governance arrangements and, as Mr Jeffries has said, we do believe that those are now robust, the procurement arrangements are thoroughly in place and ready to go to project. There has been a thorough value for money study which confirms that the project does represent value for money. Yes, there were deficiencies in 1999 but we have taken thorough and robust steps to rectify that in full consultation with all the project partners and we are confident that we have a robust project.

John Thurso

  362. One final question, if I may. From what you have just said, and you have prayed in aid the Secretary of State, are you of the opinion that the Department for Culture, Media and Sport and the Secretaries of State have been kept fully appraised of everything from your side and what has been going on throughout this process?
  (Mrs Simmonds) Yes. We welcomed the involvement of the Secretary of State, we agreed with the five tests that she set and we are happy with the way that it has progressed. The Government's interest in this is in the funding that they have put into the infrastructure and that has been the most important part of how it has gone forward. We are not here talking about public money in the sense that it is the taxpayers' money, we are talking about Lottery money which is slightly different.

  363. In your view the Secretary of State would have been aware of these monitoring deficiencies?
  (Mrs Simmonds) She is aware of the way that they have been corrected and that was the most important point about it.


  364. Mr Fytche says the process is robust but I have got yesterday's Hansard in front of me and yesterday's Hansard, a reply from Tessa Jowell, tells me, and indeed tells everybody else, that, I will read it: "The current Lottery Funding Agreement requires Wembley National Stadium Limited to make available 75,000 seats to the general public." The reply goes on that WNSL then asked you to agree to a reduction in the number of seats for the public to 71,200 so that they could get some money by transferring 3,800 seats to premium seating. That is a total breach of your agreement with them but you do not tell them it is a total breach, do you, you say you will amend the Lottery Agreement to accommodate it. How is that robust? How does that protect £120 million of our constituents' money?
  (Mr Moffet) Perhaps I may answer that because I have some degree of experience in the marketing of seats and—

  365. No, I do not want to know about that. I do not want to know about your experience in marketing seats, Mr Moffet.
  (Mr Moffet) I will be able to get to the answer.

  366. Let me just clarify this because I want an answer to this and it is not based on your experience of marketing seats, Mr Moffet. You gave them £120 million of our constituents' money, you did it, and that has never been explained and today may be the occasion for you to do so, before even a planning application had been lodged. You gave them that money and part of the agreement was that there would be 75,000 seats available to the general public but WNSL come to you and say "no, we want it to be 71,000 because we can make more money that way".
  (Mrs Simmonds) No, that is untrue, Chairman.

  367. That is what the Secretary of State says. Are you now telling me that the Secretary of State is not telling the truth?
  (Mrs Simmonds) No, I am not saying the Secretary of State is untrue but if you allow me to go back to the original question, an applicant for a Lottery grant has the right to ask for that Lottery Funding Agreement to be amended, which is what WNSL did and the reason they did it was when Patrick Carter reviewed the project he made it clear that the funding for the premium seats was not robust enough. In fact, not only was there a certain lack of clarity from Government about how the project should proceed, there was also a lack of clarity about how the premium seats, and indeed the funding, should proceed. What has happened since that time is WNSL have come back and said that in order to make the project viable there needs to be an increase in the number of premium seats which are not available to the public and as we go to the end of this what we are doing is making the seats for the public cheaper.

  368. Honestly, Mrs Simmonds. I have chaired this Committee and its two predecessors for ten years and I do not think I have ever heard a less convincing answer than the one you have just given. You gave not your money but our constituents' money, 120 million quid of it, even before a planning application had been so much as lodged, and that has never been satisfactorily explained because in my view it cannot be. You gave 120 million quid of our constituents' money to WNSL and part of the proviso of that was 75,000 seats to the general public. Now they are saying "no, we have got a different arrangement, we need to raise this extra money". We discussed this privately with WNSL and I will not go into that. They decided that they can acquire a very considerable amount of money through reducing the number of seats that the public, who are the people who gave you the money in the first place to dispense, have access to. You now give us all of this thing and you amend the Lottery Agreement but you do not amend the Lottery Agreement to the advantage of the public who provided the money, you are amending the Lottery Agreement to the advantage of WNSL, are you not?
  (Mr Moffet) Chairman, perhaps if we were able to answer this in two tranches. Firstly to deal with the whole issue of £120 million and the ability for Lottery Agreements to be changed by agreement, and on the other side the desire on everybody's part to make the seats as affordable as possible to the general public.

  369. There is nothing about affordability in the Secretary of State's answer, not a word. The Secretary of State would have wanted to put the best possible face on this but she is not putting affordability forward.
  (Mr Moffet) No, I am. What I would like to say is that that is one of the reasons why this is best practice around the world in any new stadium that is built is that you get the balance right between those seats that are procured by the private sector which will in actual fact subsidise the seats that are available to the general public, and that is what is being done in this regard. In fact, when the stadium is built there will be more seats available to the general public than in any other stadium currently in England. I think it is worth remembering that is one of the reasons why you have to get this balance right. As for the other matter, perhaps my colleague may be able to answer that. There is a capacity for any Lottery recipient to come back and talk to us about the terms of the Lottery Agreement.
  (Mr Fytche) I think it is fair to say as well that this proposal has been thoroughly evaluated. You heard Mr Carter's report at the end of the year, Mrs Simmonds referred to it, stating that there needed to be robust market research evidence to back up the premium seat assumptions that have been made. There has been a thorough process which has led WNSL to review, who then approached us and said "we would like to make this amendment to the number of general admission seats in order to make the project viable". That has been tested as part of the Carter analysis, that has come forward to us, the Council has considered it and decided that in this instance that is a sensible way forward for the project.

  370. David James in his letter, which we have been instrumental in making available to the public, said "The process adopted by WNSL is unlikely to satisfy `best practice' standards as usually deemed necessary in any project involving Government or Lottery funding. . . " David James says "The process by which the tender was offered and the contract negotiated does not follow best practice and the WNSL Board may feel it appropriate to accept a strong measure of criticism . . ." He says this several times. These are very categorical statements and you have gone along with all this and you have not quibbled with it for a moment. Now you are going along with a reduction in the number of seats that you committed them to providing for the public as part of the money that you handed over before planning permission was even sought. I think it is a very interesting way in which public funds are handled. I hand over to Frank Doran.
  (Mrs Simmonds) Chairman, before you do can I say that this Committee, and this is the fourth time I have been in front of it on this particular subject, it has said time and time again that it believes that we need a national stadium for three sports: for athletics, for rugby league and for football. We are kidding ourselves, and in fact it is a complete shame that this country has to go and play all its major events in Wales. We have heard this morning about the problems of developing a stadium in Birmingham in the future. I think we have to be clear what we gain from this. The changes that we have allowed to be made, make this project viable and it is absolutely imperative that if this project is going to go ahead, which this Committee has said it wants on a number of occasions, that it is viable. We have this amazing ability in this country to stab ourselves in the foot and to go on reviewing things and reviewing things until we completely kill them. There is a real danger today that could happen on the back of this. I think we need to remind ourselves where we started from, we need a new national stadium.

  Chairman: I am going to hand over to Frank but I cannot let that go by without saying two things: (a) we did not invite you here to lecture the Committee; (b) I regard that as one of the most deplorable statements I have heard from a witness in the ten years I have chaired this Committee.

Mr Doran

  371. If I can follow that because we have heard quite a lot this morning. Obviously you have read the Tropus and the James reports and our main function is to look after public money which is invested in this and despite what you were saying about it coming from the Lottery, Mrs Simmonds, it is effectively public money. If I were to make a comment on the remark you have just made it would be that I wish Sport England had been as robust and as proactive in the way it handled this whole affair as you were just now. I am not going to follow the Chairman's line on that. There are serious concerns. Can I say that I would like to spend a little bit of time on the land purchase issue and on the procurement but we are running out of time so I will cut that a little bit short. Just in terms of Sport England's role, can I ask you this first question. In response to questions from my colleague, John Thurso, you made it quite clear that Sport England had two observers at each board meeting, I accept they were not board members but they attended meetings. You made a statement in your submission to this Committee: "Relationships between the key stakeholders and the project deteriorated," this is in December 1999, "Roles and responsibilities had become confused, and it was unclear on what basis the project would proceed in relation to a proposed repayment of £20 million of the Lottery grant." Then we have got Schedule 6 of the James report which talks about procurement. They list all the occasions when they have not been able to find any specific evidence that Sport England was kept in the loop, that it was notified. The suggestion is that you were not kept in the loop. My question is what the hell were you doing? Why did it take the Tropus report to bring this into the public domain? Why was Sport England not acting as the public guardian, as it should be, of this £120 million worth of public money?
  (Mr Fytche) I would refer to the answer I gave at the start and perhaps enhance it slightly in respect of the monitoring procedures. Clearly during that period we were keen to receive the procurement strategy, it was a requirement of the Lottery Funding Agreement that that was approved by us. We did receive it and we did not approve it for the reasons that were outlined earlier and we ceased paying the grant for a period of time. That represents a robust approach to the protection of public money.

  372. But it is an approach which is ticking boxes and it is not proactive, that is the way it seems to me.
  (Mrs Simmonds) It is proactive to stop paying the grant.

  373. By the time you stopped paying the grant in June 1999 you had already paid over £113 million on my calculation, so you were just at the fag end of the grant, the bulk of it was already paid over to Sport England. I appreciate the point you are making but you were a long way down the line before you took action.
  (Mr Fytche) I explained earlier the basis upon which a thorough valuation was carried out before the bulk of the grant was paid in March 1999. I think it is very clear from the James Report that there were a number of serious deficiencies in the overall corporate governance and processes that were in place in the way that they were taken forward. What has happened since the James report came out, I believe, is a very thorough and responsible approach on behalf of stakeholders to grapple with those issues and to ensure that in corporate governance terms, in value for money terms, every step has been taken to evaluate, to consider, if you like, to turn over, the project.

  374. But you have not answered my question. You are ticking boxes. You have got an agreement which it is quite clear does not seem to be being enforced. For example, on the procurement you say in the agreement that it should be at the European procurement levels and yet we can see a shambles in terms of almost the disintegration of proper accepted practices. Where was Sport England when that was happening?
  (Mr Fytche) The Lottery Funding Agreement requires a competitive tendering process to be put in place and to be approved by us. Clearly we were not approached for that approval and we did stop the grant.

  375. Why were you not approaching them?
  (Mr Fytche) It is very difficult to put this in the context of the project at the time but what we say in our submission is that the whole series of roles and responsibilities, lack of clarity about the project at that point in time, contributed to the overall position that the project found itself in. I have to say that one of the key factors that the Carter Review and the OGC Review showed up is that clarity about roles and responsibilities is a key factor in making projects happen.

  376. You are hiding behind the various reports that have been made but you are not telling us why Sport England was not more proactive.
  (Mr Fytche) I think that we were proactive, we did cease payment of the grant for a period of time because we were not satisfied with the procurement strategy that was being presented.

  377. And you did not initiate anything. Can you tell me what a James' investigation into Sport England's activities in this whole affair might have thrown up?
  (Mr Fytche) I think we have provided that evidence in our submission to this Committee that provides further detail on what is set out in the James Report. Clearly David James did not have the opportunity, and in fact he says that I think, to examine Sport England's role in any detail. What we have tried to do is provide a bit more detail in our submission.

  (Mr Moffet) I think there have clearly been some deficiencies, there is no doubt about that. That may be putting it mildly in the terms that some people might look at this. Quite clearly since December 2001 there has been a much more rigorous examination of a whole range of issues. I would hazard a guess that this now is the most reviewed project in London, I could not think of anything that is going through more review at the moment, and I think that is right and proper. In addition to that, as a newly arrived Chief Executive I am also keen to ensure that whatever went wrong we do not repeat. As part of the review of Sport England I will be addressing that. I do not think there is any getting away from the fact, and I do not think we would get away from the fact, that mistakes were made and the review could have been made. As to the extent to which Sport England was responsible for that, that is a matter of ongoing concern and review by us. I think the important thing for me, and I guess it is somewhat difficult and I appreciate that in terms of the Select Committee, there is a past and there is now a future. We are, I suppose, focused very much on the future now and how we may bring this project to successful completion. Wembley, I would hazard a guess, is the biggest brand name of any stadium in the world and it deserves to exist and it deserves to the best stadium that it can be and in its location. I do not care whereabouts in the world you go, everybody knows about Wembley. It would be a shame for it not to proceed. We are working closely with the FA, WNSL and also with the Government to take it forward and to do what we can to see that it does succeed. I am cognisant of the fact that there are some concerns that you properly wish to address in respect of the past.

  378. I welcome that statement, I think it is an important statement, but the latter part of it is I think what has this Committee concerned. Because of the importance of this particular project it seems that virtually everyone, Sport England and all the other people involved, had some sort of gun at their head, "Wembley must be achieved at all costs, all rules can be bent, all the agreements can be ignored, we are going to deliver Wembley". We heard from Tropus earlier that there could be considerable cost implications because of that.
  (Mr Moffet) When I was appointed to this position I took very seriously my role in protecting public funds and I take that very seriously, not just because I am the Accounting Officer for Sport England but because I have a passionate belief that we should be doing the right thing with public funds. Just as an aside, I recently carved ten per cent out of our overheads to ensure that more money went to where it is supposed to be going, which is into the public domain. I do not disagree with that at all. We will be doing everything that we can to ensure that public funds are protected, in particular the £120 million. I formed the opinion that the best way to protect those funds is to have the stadium built and there has been much discussion, and you were about to allude to it before, about the cost of the land and the purchase price and I think those are relevant questions but there is also a view that when Wembley is built and it is successful that the value of the new Wembley will far exceed the cost that was made of that original purchase. We do not know that for sure but certainly in the realms of business that is what one would expect. In terms of the £120 million there is no doubt that the best result for those public funds is for the stadium to be built. The other thing that I would like to add, and this goes to the questions about Birmingham, is that there is a lot of doubt about the Birmingham project but we would do whatever we could and whatever it took to reclaim the £120 million if this was to fall over. As you have heard, that would include us ensuring that the existing stadium was utilised for 20 years.

  379. Do you accept that the security you have is a lot less than what Sport England has actually paid over? It could be as low as 30 million.
  (Mr Moffet) I think in raw terms that could possibly be the case but over a time and with that staging agreement in place with the FA we would expect to be able to recover the whole of the £120 million because that is the important issue. To be perfectly honestly with you, on that basis I would have to say that Birmingham looks extremely remote because we, as Sport England, would be doing whatever we could. That could be one of many ways, we could get £120 million repaid by WNSL and/or the FA or we could come to some sort of arrangement where it was paid back over a period of time. Let me reassure this Committee that we will do whatever we can if this falls over to reclaim public funds, we are totally committed to that.

  Mr Doran: I would like to go on but I had better stop there.

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