Examination of Witnesses (Questions 60
- 79)
WEDNESDAY 28 JANUARY 1998
SIR RICHARD
MOTTRAM, KCB
60. Can you point to a period when the opposite
trend has lasted for any real length of time?
(Sir Richard Mottram) If we were where we were
in, say, 1990 and we had thought where we would be in 1994-95,
that was a period-not a 30-year period, I quite agree-where the
price of houses fell substantially.
61. How long has it taken you to accumulate
this estate do you suppose?
(Sir Richard Mottram) One hundred and something
years.
62. I have every sympathy with you having
to answer some of these questions. I do not mean in any sense
to be snide when I ask you this, but it is to illustrate a point.
I assume you receive the accounts for Annington. Would I be right
in assuming that after he has had his profit bonus the chief executive
of Annington earns a good deal more money than you do, Sir Richard?
(Sir Richard Mottram) I do not know the answer
to that question because I am not sure we have seen any accounts
for Annington.
63. I will not press it. I simply wish to
make a point.
(Sir Richard Mottram) In my experience the chief
executives of most organisations are paid more than I, but I am
not complaining about that.
64. We are all sympathy. Can we just explore
the retention of Savills and Coopers & Lybrand, both excellent
firms, I know? They faced competition when they were retained
for the housing trust proposals.
(Sir Richard Mottram) Yes.
65. Why did they not have to face renewed
competition when you were moving on to the new exercise? After
all, after spending £7.6 million you still did not have the
database to which I alluded a few moments ago.
(Sir Richard Mottram) No. The reason why we decided
to do this was because some of the money we have spent in the
housing trust-I am not suggesting all of it-had indeed gone to
generate information and expertise, above all amongst a small
group of people who understood, in the case of Savills, the nature
of the estate we are dealing with, which is a very large thing.
It is the biggest estate of houses ever sold in the world probably.
In the case of Coopers & Lybrand, they were people who knew
the financial modelling we were interested in. The issue was whether
we should go to competition in circumstances where we knew they
had the expertise we needed. We took a judgement that such a competition
would not make sense.
66. Is that why it says in paragraph 2.39
of the report, "... the Department consider that work on
the Housing Trust proposals helped to refine their thinking and
approach to the later property sale"?
(Sir Richard Mottram) Yes; that is right. Exactly
so; yes. Otherwise we would obviously have gone to competition.
67. When it came to that sale, bearing in
mind the players involved, why was a deferred payment allowed?
When they were getting such a good deal, why should there have
been a deferral of some £700 million of the consideration
in a second tranche for which the interest opportunity cost was
about £27 million, I think it says somewhere in the report?
(Sir Richard Mottram) Because the Treasury wanted
the money to be paid in two tranches.
68. Since you are saddled still with the
maintenance task, can you tell me what sort of a register or database
you have now? What sort of schedule of condition do you have for
each of the properties which you have to maintain?
(Sir Richard Mottram) I cannot give you a detailed
answer on that now. May I give it to you in detail?[6]
69. I am just curious to know whether any
attempt of any kind has been made. You cannot see it but I can
see somebody nodding behind you.
(Sir Richard Mottram) Yes; there is somebody nodding
behind me who is in charge. I will produce a note to meet your
point.
70. I am grateful. Paragraph 8a) talks about
a clawback which you have received on disposals already. A profit
clawback clause is written in here. It says that £1.25 million
has already been received on disposals.
(Sir Richard Mottram) Yes.
71. Does that not indicate that the main
transaction price was well too low if you are already making that
kind of profit on a few properties dribbled out?
(Sir Richard Mottram) I do not think so. We knew
when we sold the houses that we expected Annington would dispose
of some of them. Indeed we were keen that they should get on and
dispose of some of them because we thought that they might well
be better at disposing of them than we would be and we certainly
transferred the risk of the problem of disposal to them. In fact
the numbers have gone up and the position now is that we have
received £2.29 million.
72. That is a pittance, is it not, compared
with the overall consideration?
(Sir Richard Mottram) Yes, it is; absolutely.
When you also look at how all of this was treated in the investment
appraisal these are fairly small sums.
73. Has anybody estimated how that will
grow over the next five or ten years to give us a second guess
at where you thought inflation and property prices might be going
when this decision was taken?
(Sir Richard Mottram) We have a calculation which
I cannot now put my hands on of what the total value to us would
be over the period in which this clawback operated, which was
15 years. Could I give you some advice on whether this is more
than we had expected?[7]
74. May I go back for a second to the trust?
Some £375,000 was spent on the three individuals. Where have
they come from and where did they go to?
(Sir Richard Mottram) They had come from the housing
sector.
75. The private sector.
(Sir Richard Mottram) I think they were local
government. One of them was and is employed by us and is actually
sitting behind me. There were three individuals concerned: one
of them continued and became the chief executive of the Defence
Housing Executive; two of them, as we were not proceeding with
the housing trust, were made redundant. I could give you a note
of where they are working, if we know. I do not personally know.[8]
76. Rather than pursuing this line now,
is it not the case that this decision was a seat-of-the-pants
decision which was rushed at, which was dressed up with all the
proper advice at the last minute but was a decision which resulted
in the selling short of Government assets?
(Sir Richard Mottram) I would say it was actually
quite the reverse. We had a very clearly laid down policy by Ministers
which was absolutely their responsibility and their duty. Within
the framework they laid down, we set about thinking about how
that policy could be implemented in a way which would maximise
the revenue to the exchequer. What the report shows is that we
did that. It may well be that members of the Committee have different
views: this is not a matter for me. I am a wholly non-partisan
person and this subject became highly partisan. Members of the
Committee may have views about the merits or otherwise. What I
hope people would agree is that the report shows that within the
confines of the Government's policy we sold these houses in a
way which produced a very good result for the exchequer.
Mr Wardle: I think Sir Richard has
fought his corner steadfastly.
Chairman
77. I would remind you that this is a non-partisan
committee.
(Sir Richard Mottram) I said it was potentially
a partisan issue. I quite agree about the Committee.
Maria Eagle
78. It seems to me that the MOD retained
a reversionary interest on this estate. Is that correct?
(Sir Richard Mottram) Yes, that is correct.
79. You seem to have sold 999-year leases
and then taken out or negotiated underleases of 200 years, which
you have.
(Sir Richard Mottram) Yes.
6 Note: See Evidence, Appendix 1, page 30 (PAC 172). Back
7 Note:
See Evidence, Appendix 1, page 30 (PAC 172). Back
8 Note:
See Evidence, Appendix 1, page 30 (PAC 172). Back
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