Examination of Witnesse s (Questions
443 - 459)
WEDNESDAY 12 JULY 2000
THE RT
HON CHRIS
SMITH, MS
CLARE PILLMAN
OBE AND MR
MIKE O'CONNOR
CBE
Chairman: Secretary of State, welcome.
I am sorry we delayed you but I thought it was important for the
questioning of Lord Falconer to go on for as long as members of
the Committee felt it necessary.
Derek Wyatt
443. Good morning. I may have suggested a rather
rash statement in previous questions, and I wonder if you could
put me right about visitor attractions. Is it true that visitor
attractions on the big Millennium awards are down, except for
Edinburgh, or up and down? Or does it vary?
(Mr Smith) I am afraid, Mr Wyatt, unusually,
the assumptions behind your earlier questions were wrong. The
general pattern of visitor attractions funded by the Millennium
Commission is that visitor numbers have been very considerably
in excess of those that were predicted. I can supply the Committee
with a complete list, but just to give you the flavour: visitors
to the Lowry Centre in Salford are 112 per cent up on budget;
to the National Botanic Garden of Wales, 48 per cent up on budget;
to Our Dynamic Earth in Edinburgh, 48 per cent up on budget, and
to The Big Idea, Glasgow, 44 per cent up on budget. There have
been two where visitor numbers have fallen very slightly below
budget, mainly because they are entirely outdoor attractions and
the weather over the last two months has not been helpful, and
they are Slimbridge and the Scottish Seabird Centre. The only
one which, apart from the Dome, has been a serious disappointment
in terms of visitor numbers is the Earth Centre near Doncaster,
and there have been special problems there, which we are in the
process of helping them to sort out.
444. Thank you for that correction. I am sorry
I got that wrong before. Has there been an analysis ofthe regenerational
impact of these big awards? If there has, has it been put in the
public domain yet?
(Mr Smith) As far as I am aware, there has not been
any precise, scientific analysis, largely because they have only
been up and running over the last few months, so it is too early
to assess in detail what the regeneration impact is going to be.
What we do have, however, is ad House of Commons evidence of individual
projects. If you take the Lowry as an example, immediately next
door to the Lowry Centre itself is a commercial redevelopment
including hotel and residential accommodation, worth, I think
I am right in saying, something like £70 or £80 million.
Everyone concerned—Salford City Council, the developer and
those in charge of the Lowry Centre—are of the view that
that would not have happened at all if it had not been for the
presence of the Lowry Centre there.
445. It certainly seems to us, on our various
visits around the country, that regeneration is a big factor.
If you are not yet going to do it, as it were, is it in train,
so that there will be something put into the public domain over
the next, six or nine months to a year?
(Mr Smith) It will certainly be done because what
we are doing and preparing to do, as the Millennium Commission,
is a proper economic impact assessment of all our major projects,
so that we can put that information into the public domain. Obviously,
we need hard evidence in order to base such an assessment on,
and that will come once some of these major projects have been
in place and running for a few months.
446. Have you got any concerns at all about
the revenue implications, moving forward, for any of the big projects?
(Mr Smith) We have indeed done a very careful analysis
of the visitor projections and income flowprojections which have
been made for each of the major projects. We undertake a process
of a business operational review, and we check on a regular basis
for each of our major projects to make sure that the assumptions
on which the original grant was given are, indeed, holding good.
I think one has to admit that the experience of the Earth Centre,
in particular, brought us up sharp in terms of not automatically
accepting the visitor projection figures that were in the original
application and on which the original grant confirmation was made.
The need to check those assumptions on a regular basis and to
test them against what is likely to happen in reality is something
that we are very conscious of and we now do on a regular basis
for each of our projects.
447. Looking at the whole of the big, £50
million projects and above, given there was no audit undertaken
as to what the needs were of the British community—they
were allocated on a regional area, almost—what do you think
is missing, as it were, from the British landscape that we have
not done, that you think we might like to have done or should
have done, or, indeed, might get done?
(Mr Smith) That is a tempting but entirely hypothetical
question. The way in which the Commission approached its work—and
this was put in place, obviously, before we came into Government—was
that there was a decision that there should be at least one major
landmark project in each region of the country, including the
nations of Scotland, Wales and Northern Ireland, and that the
content of each of the major projects should be up to (a) those
putting in the application to determine and (b) the Millennium
Commission to decide whether it had a real Millennium flavour
about it—whether it was going to make a significant difference
to the cultural or educational landscape. As a result, we have
ended up with, I think, a rather rich variety of different projects.
The Millennium Stadium in Cardiff, the new University of the Highlands
and Islands in Scotland and Tate Modern are three completely different
projects, but they are all Millennium projects, all funded by
the Millennium Commission; one educational, one cultural and one
sporting. I think that one of the benefits of the Millennium Commission
has been that we have ended up with a very varied pattern of major
projects coming forward. They have not all conformed to just one
model.
448. Finally, can I ask a small favour, which
I am sure you can do? Given these things are pretty spectacular,
is there any way the Government could enable a Millennium Week
in the Christmas period where we could coerce the rail operators
to, perhaps, do a cheaper rail fare for entrance so that families
all over Britain could go to Portsmouth or Cardiff or the Botanic
Gardens, or Glasgow—because, otherwise, we will not go and
it will be a fantastic way of celebrating the end of this particular
year?
(Mr Smith) I think it is an extremely good idea, which
I will put to my Commission colleagues and we will see what we
can do with the train operators and the bus operators.
Mr Fearn
449. I am interested to hear you say that the
revenue costs, at the moment, look as if they may be met on most
of the attractions, but I have in mind—and I have talked
to the Lowry Centre on this one as well—what will happen
in four or five years' time? They may well exist, and go on to
greater things, but I have in mind the Armouries at Sheffield,
which was spectacular when it opened and had the visitors that
it expected, but suddenly there was a downturn and people did
not go back again. There are loads of those projects through the
Millennium Commission all over Great Britain, some of which may
not continue like that. Can you not see that happening?
(Mr Smith) Of course, the Royal Armouries in Leeds,
rather than Sheffield, was a PFI project. It did not have any
Lottery money and, certainly, no Millennium Commission money involved
in it. Some of the problems that the Royal Armouries has had—and
it certainly has had problems, as I know to my cost because I
have had to put in an additional £1 million from my Departmental
budget in order to ensure that it can survive—have largely
derived from the nature of the original PFI deal and the split
of responsibilities and return between the private sector operator
and the Royal Armouries themselves. We have now put in place steps
to put that right. The visitor numbers are, perhaps, not as exciting
as in some of the other great national museums around the country.
I think that has partly been because of the PFI issues. The Armouries
have not been able, up to now, and they are now beginning to do
this, to put enough thought into special exhibitions and ways
of attracting the public in—special concessions for families
to come with children, and so on.
450. So if any of the attractions which have
been set up in the last few months get into difficulties, and
they come to your department (I know it is a Treasury matter as
well), if they ask for financial help will you say no?
(Mr Smith) That depends on the institution, the question
that is asked and the circumstances. I would have to say that
in most cases the answer would be no, because I would have no
direct responsibility, as a Department, for running, supporting
or funding the institution. There are exceptions. Tate Modern,
for example, because it is one of the national museums and galleries,
falls under my stewardship, and after discussion with the Tate
I decided, out of my Departmental budget, to make £5 million
this year and £6 million next year of additional funding
available to the Tate so that they could open Tate Modern and
give free entry for everyone. That was a Departmental decision,
and that commitment will remain firmly in place.
451. Can I switch to something that the English
Tourist Council have identified, and quite rightly: the need for
a national attractions strategy, they say, "to address the
management and information deficit and redress market distortion".
Have you considered preparing such a strategy, with so many attractions
that we have now?
(Mr Smith) This is something, indeed, which the ETC
has indicated it believes is an important area of research. We
would look to them as our principalstrategic and research adviser
on the tourism and hospitality field to set in motion work of
that kind. It is, actually, a very important issue, because at
the moment all we have to go on is the evidence from individual
sites and individual attractions. What we do have is some work
that has been done by the Henley Centre for the Joint Hospitality
Industry Congress. That was published, I think, last week. That
does indicate that they anticipate that admissions to attractions,
not including the cinema (the cinema is somewhat higher in percentage
terms) is likely to show something like a 6 per cent growth over
the next few years. So, their perception—and this is the
Henley Centre's analysis—is that the visitor numbers for
attractions in general are likely to rise over the next few years.
Breaking that down into what the regional effects are going to
be, what the implications are for different attractions and the
draw that they have for particular types of visitor—all
of those sort of detailed bits of analysis, no one has done up
until now. I know that the English Tourism Council are very keen
to do so.
452. Finally, Mr Chairman, just a small one
on the Dome. The Millennium Commission's role when it came to
figures, in reviewing those figures and actually setting them
(the 12 million, really), what role did you have in that? Was
it purely a Millennium Commission decision?
(Mr Smith) The history is, as I think Lord Falconer
indicated in his earlier session of evidence, that right from
the start of the Dome idea, back in 1995, figures of around the
10 to 15 million mark were being talked about. When the Commission
agreed the site selection guidelines in May 1995 they spoke about
15 million visitors being the aim. On 16 May 1996 the Millennium
Commission adopted a visitor target of 10 million. On 11 December
1996 the Millennium Central, which was the predecessor of NMEC,
recommended a visitor numbers target of 13.5 million. In January
1997 the Millennium Commission revised that budget and put in
a visitor assumption of 10 million. On 12 May the NMEC business
plan, which was then presented, had an assumption of 12 million.
So all through that period, up to the time when I took over as
Chairman of the Millennium Commission, the figures were roving
between 10 and 15 million. Those were figures which I accepted,
which I think all of us accepted. Indeed, I think there was discussion
at this Committee atone of its hearings which seemed to indicatethat
everyone was working on these sorts ofassumptions. I think we
all got it wrong. For that I think we have to admit that we made
mistakes, in assuming that these were going to be the sorts of
numbers that were going to come. Given that this was a totally
new venture, that it was innovative and that no one had ever done
anything quite like this before, we were all working on, to a
considerable extent, guesswork.
453. I hope we did not pay anybody for those
figures.
(Mr Smith) I have no evidence of that. There was some
opinion polling done to try and ascertain how many people were
likely to come to the Dome as and when it was opened. That opinion
polling confirmed those assumptions which were in place.
Mr Faber
454. Secretary of State, in the light of what
you have just said to Mr Fearn, would you describe the 6 million
visitor target which NMEC have now adopted as disappointing?
(Mr Smith) Certainly, from the original expectations
that everyone had, 6 million is more disappointing than the original
prediction of 12 million. However, it is realistic; it is based
on the experience to date and the fact that the school holiday
period, which is likely to be the best period of the year, is
yet to come. I think it is better, certainly, once you have evidence
in front of you, to be realistic rather than over-optimistic.
455. Mr O'Connor, would you agree with that?
What would be your view on that 6 million figure?
(Mr O'Connor) Certainly 12 million was too high. The
6 million figure—plus 1 million free school children, so
7 million—as a target is achievable. This has never been
a project without risks. We are obviously depending on a good
summer, but we believe—I believe—it is still achievable.
456. Am I right in saying that, of course, a
couple of weeks before they revised down to 6 million in late
May, the figure was higher, 6.7 million? Perhaps I can quote from
a letter you wrote to the Secretary of State on 17 May? "The
latest visitor numbers are very disappointing. NMEC are currently
attracting 6 million visitors, by our calculations, as opposed
to the draft budget put to us two weeks ago which was based on
6.7 million visitors".
(Mr O'Connor) I think it is fair to say that they
revised their target to 10 million at the end of February, and
what happened between January and May was that visitors were not
turning up in the numbers expected. So throughout that period
the situation was getting worse, but they settled on a target
of 7 million visitors, which is the current business plan.
457. I would like to examine the run-up to 22
May in some detail and, in particular, your relationship, as the
Millennium Commission, with NMEC. You are constantly quoted as
their banker. How would you describe your relationship with them?
(Mr O'Connor) The relationship is close. We monitor
their figures, we work with them, we are the providers of grant
and we, obviously, monitor how their business is going.
458. Can I quote three other quotes to you from
that same letter? Following on from the 6.7 million visitors you
say of NMEC: "Their attitude does not bode well for the future
and it will need to be confronted." You say: "Once again,
the willingness of the Board and the management team to act differently
to the way they have done in the past is critical". At the
very end of the letter you say that you are hoping that NMEC will
take tough decisions and you say: "and that we will now be
able to move out of conflict and crisis". That is a pretty
damning indictment of a banker's relationship with his client.
(Mr O'Connor) Throughout the period January to May,
clearly, nobody was happy with the way the business was developing.
It was a very fraught time, people were under huge pressure and,
sometimes, tempers did get frayed. We now do have a good relationship
with NMEC, we believe their business plan is achievable but, of
course, this is still not a business without risk.
459. Secretary of State, could you explain to
us a little more about the letters that were written at the time—the
letters of direction? One, I understand, is by your Permanent
Secretary and one by yourself. Can you explain to us what their
purpose was?
(Mr Smith) First of all, the letter to which I assume
you are referring, written by the Permanent Secretary, was not
a letter of direction, it was a letter which was requested by
the Commission members asking if the Government would re-confirm
the position which it has hitherto held, and the previous Government
had held, that if additional funds from the Millennium Commission
had to be made available to NMEC to enable the Dome to continue
its operations, that that would not be allowed to affect the Commission's
other programme of capital projects and other work. The Permanent
Secretary wrote that letter and it simply re-states what Government
policy is. The letter of direction to Mr O'Connor, as the Director
of the Millennium Commission, was a separate letter arising out
of the meeting of the Commission on 22 May. That was written by
me on behalf of the Commission—the unanimous decision of
the Commission—and they asked me to write the letter, as
we had to. It arose from the advice that Mr O'Connor had given
us in relation to the application that had come in from NMEC for
additional funding of, I think it was £38.6 million. Mr O'Connor
advised us that taking the narrow view, which he had to, very
specifically simply looking at the Millennium Commission's own
financial interests, in that narrow context, if we were to make
a grant of £38.6 million it would not, in his view, be value
for money. He did also point out to us that there were other wider
considerations that we might well wish to take into account in
coming to a decision on this, but that if we took those wider
considerations into account we would have to, under Government
convention, issue a letter of direction, and that would have to
be reported to the NAO. That is what we did.
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