Examination of Witnesse s (Questions
460 - 479)
WEDNESDAY 12 JULY 2000
THE RT
HON CHRIS
SMITH, MS
CLARE PILLMAN
OBE AND MR
MIKE O'CONNOR
CBE
460. Could Mr O'Connor say a little bit more,
as he says his objections to payment of grant were based not on
issues of formal propriety but on value for money? What were your
concerns about value for money?
(Mr O'Connor) I am accountable to Parliament for the
use of the money which is given to the Millennium Commission,
which is National Lottery money. I took the view that the Commission,
substantially, had achieved one of its main objectives in giving
a grant to NMEC: we had regenerated the peninsula. So that objective
was in the bag. The other objective of providing a year-long experience
has been, at least partly, achieved, and in those circumstances
I did not think we could justify spending more money. I could
only account for the National Lottery money. I was, however, aware
of the fact that if NMEC were to go into liquidation, which could
have happened, then the costs of closing that organisation could
be significant. The estimate put to us by NMEC was £200 million.
Now, that debt would not fall to the Millennium Commission, but
it could and probably would have fallen to the public sector as
a whole. So I informed the Commissioners that from the perspective
I had to look at—the Lottery money—I could not recommend
the grant of £38.6 million that NMEC were requesting, but
that they could, if they wished, consider wider factors. They
did consider the wider factors and they decided, unanimously,
to go ahead with a grant.
461. On the same day, Secretary of State, that
NMEC had applied for just under £40 million, do you accept
that the worst case might have led to up to £80 million additional
grant. How did you arrive at that figure?
(Mr Smith) The advice that we received from officials
at the Commission looked at a range of figures in relation to
potential visitor numbers and costs, and, also, what was likely
to be achieved by cost-cutting measures within NMEC's operations.
If the worst possible assumptions on visitor numbers, well below
6 million, were made and if no cost-cutting was achieved, then,
obviously, the amount of money that would be required would be
greater than the £38 million that was being applied for and
the £29 million which was granted. We had to make a set of
reasonable assumptions about what the visitor numbers were actually
likely to be, what was a reasonable expectation, and what we would
wish to see NMEC do in terms of making cuts in their expenditure
and economies to their operations, and that was the judgment that
we made.
462. I would like briefly to run through the
conditions which the Millennium Commission applied to NMEC in
granting this new funding. First of all, on the cost side, Mr
O'Connor, you said on 11 May that you had signed up Capita to
carry out an audit of NMEC. You said rather critically that: "this
is to ensure that there are no further unrecorded or unbudgeted
items in their accounts." What unrecorded or unbudgeted items
were there already?
(Mr O'Connor) As Mr Gerbeau has pointed out, there
were cost overruns of some £26 million, which he had brought
to our attention. In terms of making any further grant, it was
incumbent on us to make sure, and I had an independent check of
NMEC's finances. This is something which we do relatively often,
not just with the Dome. Sometimes you have to make sure that you
are fully aware of all the finances—especially important
in circumstances where you are being asked for an extra grant—so
we needed to check, as we do with other projects, precisely their
finances.
463. Could you tell us why the Commissioners
thought that Mr Ayling should be removed from the job and, indeed,
the other changes which were made to the board, I believe.
(Mr Smith) The discussion that took place on 22 May,
there was a long discussion about the application to the Commission,
about the way in which the NMEC had arrived at the need for additional
funds. There was very much an appreciation of the hard work and
the voluntary contribution that Bob Ayling had made over a considerable
period of time to getting the Dome to completion; but I think
there was concern about the strength of corporate governance by
the board of NMEC of the overall operations and particularly thefinances
of NMEC. There was a wish on the part of the Commissioners and
it emerged very much from the discussion at the meeting. There
was a strong wish to see a strengthening of the board and a fresh
start in the chairmanship. That was conveyed to NMEC immediately
after the meeting. If it would be helpful, Mr Chairman—I
would need to obtain the approval of my fellow Commissioners obviously—but
if it were helpful, I would be happy to recommend to them that
we make the minutes of that meeting available to you, in confidence
obviously, so that it may help the Committee.
464. Thank you very much. Two final questions.
Going back to your letter of 17 May, Mr O'Connor, you say to the
Secretary of State: "The tendency for the media to associate
the project with the Government is such that you may wish to consult
colleagues on the emerging situation." Did you do that, Secretary
of State? Other colleagues in Government?
(Mr Smith) I obviously kept a number of colleagues
in Government informed on an occasional basis as to what was happening.
That would be only normal.
465. Did you discuss it with the Prime Minister
at any time before the 22nd?
(Mr Smith) I think I wrote to the Prime Minister at
some stage during that period just to update him on what was going
on.
466. Finally, Mr O'Connor, you go on to say
that your own preference—and this was on 17 May—is
that: "we organise a run-down and withdrawal by the end of
September." That was quite a strong view for you to have,
given that NMEC and Government and everyone else was saying that
this project—and we have just heard Lord Falconer tell us
that this project would go through to the end of the year. Were
you so sure that it would have been better to have closed it at
the end of September? Is that still your view?
(Mr O'Connor) That view is obviously consistent with
the decision not to provide extra grant. If you are chary about
providing extra grant, then obviously it means a closure at some
time. The Commission took the view that this was not the way they
wanted to go. Therefore, it is not going to close.
467. Therefore, they disregarded your advice?
(Mr O'Connor) They took into account wider issues
and they decided that they wished to continue.
(Mr Smith) If I could supplement that answer. Amongst
the considerations that the Commissioners took into account, from
the information in front of us, was that the possible cost of
immediate closure of the Dome, if we simply refused to make any
money available, would be something like £200 million; and
that would be likely to fall to the public purse. If we went for
an early closure before 31 December, it might be in the region
of £150 to £180 million of cost. Those were considerations
which we had to take into account.
468. So you now share Lord Falconer's confidence
that the exhibition will remain open to the end of the year?
(Mr Smith) Yes.
Ms Ward
469. Minister, in response to earlier questions,
you said, I think it was the Henley Centre, which had produced
statistics that suggest that visitor numbers are likely to rise.
Are those international visitors or are they domestic?
(Mr Smith) As far as I am aware—and this is
a very recent publication by the Henley Centre and it is projections,
it is their estimates of what is likely to happen, given their
understanding of the economy and the patterns of spending that
individuals within the economy are undertaking—these are
based primarily on domestic visitors, people from within Britain,
making the decision to go to visitor attractions. I do not think
they make any assumptions about dramatic increases in numbers
of foreign visitors.
470. Given that these figures are fairly recent,
did the Commission ever take into account likely visitor numbers,
that sort of statistic or research, before it decided to embark
upon what is a significant capital investment in visitor attractions?
(Mr Smith) In relation to visitor attractions, as
I indicated before, no-one anywhere in the country has yet done
a proper analysis of the overall spread of visitor attractions
and the economic impact of their creation. That is work which
I very much hope will emerge from the English Tourism Council.
However, in relation to each individual project, we have sought
analysis. We have looked at the market research about what the
likely take-up is going to be. We have looked at the business
assumptions that have been put into the case. We have sought outside
advice from experts in each case about whether the figures are
likely to stack up or not. Indeed, as I indicated in my earlier
answer to Mr Wyatt, the figures, with the exception of the Earth
Centre, which was the first project to open before we really put
this sensible monitoring system firmly in place, with that exception
the figures have borne out the work that we have done. Overall,
in terms of paying visitor attractions, the figures are, I think,
something like 24 per cent in excess of budget so far.
471. We have had some magnificent funding of
projects from the Millennium Commission up and down the country.
Some of those the Committee have had an opportunity to look at.
I do, however, have a horrible fear about the future. Whether
or not all of these projects will have the necessary revenue to
allow them to continue. We may reach a point in three to five
years where we start to see some of these projects finding it
impossible to carry on. Is this something which you share?
(Mr Smith) We certainly try and look at a long-term
prognosis for each of the attractions. One of the iron laws of
visitor attractions is that unless you refresh what it is people
are going to see over a period of time, you are not likely to
get as many repeat visitors as you would otherwise do. But if
you do go for a process of rejuvenation in each attraction, then
you are likely to be able to attract people to come once again.
What we have sought to do is not just to test the visitor number
projections that each individual attraction has put to us, but
we have also sought to ensure that the management team in place,
and the ideas that they have for the future of each of the attractions,
are vibrant enough to ensure that this rejuvenation process is
likely to happen.
472. Would you accept that the Millennium Commission
has shown a bias towards certain types of capital projects? There
is a suggestion that you have looked at architectural issues rather
than the purpose of some of the centres; and that in the future,
without the Millennium Commission funding, science and natural
environmental projects may be at risk.
(Mr Smith) In fact, a rather high proportion of the
major projects that the Millennium Commission has undertaken have
been in the fields of science and of the natural world. In relation
to the natural world: the Kew Millennium Seed Bank, the Eden Centre,
the Scottish Seabird Centre, the Dynamic Earth project, and so
on: a whole range of projects that have focused very much on the
natural environment. In relation to science, major science centres
like The Big Idea in Glasgow, Technopolis in Norwich, the Space
Centre in Leicester, and so on: these have been major themes of
the Millennium Commission's work. In addition, one should not
just concentrate on the big landmark projects. The smaller schemes
like the Millennium greens and the Millennium woodlands have made
a major impact in many smaller locations around the country in
helping the natural environment. In relation to the Millennium
Awards to individuals, many of those have been focused on scientific
and educational endeavour. That, of course, is going to be a programme
which is not just for the Millennium period, but we are leaving
in place an endowment of £100 million, so that the Millennium
Awards process can continue in perpetuity.
473. How will you ensure that science and environmental
projects continue to receive funding after the Millennium Commission
has ended its work?
(Mr Smith) Each of the major projects has a business
plan in place, which has been not only agreed by the Commission,
but trawled over in detail by the Commission to ensure that the
prognosis is going to enable it to continue and thrive. In fact,
the evidence so far—particularly from somewhere like the
Eden Centre, for example, which is still a building site, which
has opened a small visitor centre to the public with no publicity
about it paid for at all, and with visitors being able to come,
look at the visitor centre, take a train down to look at the building
work taking place and come away again—has already had over
100,000 people coming in the course of something like three months
to see it.
Miss Kirkbride
474. May I ask Mr O'Connor. The amount of money
that has been spent on the Dome is around £250 million for
the regeneration project of Greenwich, which everybody thinks
is a good idea, given the location. £500 million also has
been spent on the contents of the Dome. As a Millennium Commissioner,
partly responsible for what the money goes on, do you think £1
million per visitor has been a good investment and value for money?
(Mr O'Connor) I can only account for the grant from
the Millennium Commission, which stands at £538 million at
the moment, from a decision which we originally took in 1996 to
support the Dome, which culminated in a grant of £449 million
in the middle of 1997 and was, I believe, the right decision.
It was right to do that. The subsequent grant of £60 million
made at the end of January/early February was also right in the
circumstances. I took the view, as an Accounting Officer, that
the final grant did not constitute value for money but it is easy
to talk in hindsight. The Commission took the right decision.
The aim of 12 million visitors was too high but, as I have said
already, we have achieved a major objective. The 25,000 jobs,
which will be created in the Greenwich area over the next few
years, the regeneration of that whole site is a huge prize which
is well worthwhile. The fact that we have created in just a few
months, the second most popular visitor attraction in Europe,
is a magnificent achievement.
475. What about the other projects? We have
talked a little about the many other projects the Millennium Commission
have funded, some of which are in Scotland and separate from that
but there is concern about their ongoing financial future given
that there has been quite a proliferation. Do you think in retrospect
the Millennium Commission were right to look for so many visitor
attractions as opposed to perhaps more environmental schemes which
would not have required self-financing in the future?
(Mr O'Connor) Well, of course, 75 per cent of the
capital projects which we have supported—three quarters
of them—are not dependent on paying visitors so it is only
one quarter. I think what we have done in the Millennium Commission
is to create a whole legacy of important new projects. If I can
pick out one theme, the science centres. This country's economic
wealth is largely dependent on our history of science and technology,
in the future that is going to be even more true. If by promoting
greater public understanding of science we can attract more young
people to science, both men and women, if we can persuade the
public to understand science and be more open about scientific
developments, I think we will have done something very important.
It is a very big statement, about the aspirations of our generation
for the future. If you say to me can I give you a guarantee that
all of these projects will prosper forever more, that is not a
guarantee I can give you but we did not go into this project on
that basis. We always said we would supply the capital funding.
We have created the assets. We believe all the assets have sound
business plans but it is a competitive market out there and they
will obviously have to market themselves. I think it is wrong
to be pessimistic. I believe that the people who are driving these
projects are not only visionary but they have got sound commercial
sense also. I believe they will be successful and I think it has
been a very worthwhile investment in the public assets of this
country, one which when I go abroad or when ministers from other
countries come here they really quite admire the steps which Britain
has taken. I think they wish they had done something similar.
I am very proud and over time this nation will be quite proud.
There is growing support for Millennium projects. Within the House
of Commons there is support from MPs. When we asked MPs just two
years ago what proportion of them believed our projects were benefiting
their constituents only 47 per cent of MPs said they were benefiting
their constituents. When we carried out the poll at the end of
last year this had risen to 76 per cent so I think there is a
feeling that the projects, large and small, including the 500
village and community halls across the country and the rehanging
of church bells, from the large to the small, are bringing benefits
which are worthwhile. I can understand the focus on worries and
doubts and the odd project which people may have doubts about.
As a Commission we have taken some risks but, had we had not taken
those risks, if we had not spread the money around the country,
and of course people all over the country play the Lottery, if
we just had invested in things which were racing certainties—and
without being unkind to London and Edinburgh it is easier to make
projects work in London and Edinburgh—if we had not spread
the money around I do not think we would have served the Lottery
player well. Also I think if we had not gone for new types of
projects like the science centres and like the environmental centres
we would have failed in our ambition. We would not have matched
up to the aspirations of the British people. So we are not risk
adverse, we take some measured risks but I think the overall picture
can be very good.
Chairman
476. Can I just interrupt you. I am not wanting
to stop your questioning but could I just clarify your technical
role. Are you technically an accounting officer?
(Mr O'Connor) Yes.
Miss Kirkbride
477. Can I ask Mr Smith, at the time of the
last election you were a critic of the Dome or it was reported
in the newspapers that you were a critic of the Dome and that
you were not terribly keen that the project went ahead. Do you
now believe it is rather ironic that you are presiding over what
some people consider to be a failure?
(Mr Smith) First of all, of course, I chair the Millennium
Commission, I am not presiding over the Dome. Secondly, as you
will doubtless know if you read the account in the book which
was written by Mr Nicholson about the process of decision making
in relation to the Dome, you will see there that I had recommended
that we should perhaps go ahead with something which was rather
smaller and more educationally focused than we ended up with.
However, that was not the decision which was taken. Once the decision
had been taken to proceed with the Dome as a major visitor attraction
that was something that I was more than happy to pursue to try
and make sure it happened in the best possible way.
478. You must have regrets that what you originally
thought might well have been a better way forward has been the
case?
(Mr Smith) No. There was a very clear decision to
proceed with the Dome as a major visitor attraction. As soon as
that decision had been taken it was essential that all of us—and
I did so very gladly—should set about making sure that it
happened in the best possible way and was going to be the greatest
possible success.
479. Can I pick you up on the way you answered
my first question when you said "I do not preside over the
Dome". That could be read in some quarters as being a little
distancing. You do, in fact, answer questions on the Dome in the
House so as far as MPs are concerned you are the man responsible
for the Dome when answering our questions?
(Mr Smith) That is not strictly correct. It is important
to recognise that there is a clear distinction between my role
as the Chairman of the Millennium Commission that is making available
funds to NMEC and the role of the shareholder of NMEC who is in
the position on behalf of NMEC of receiving those funds. It would
obviously not be right for me to be on both sides of that fence.
I have very strictly to maintain my role as Chairman of the Millennium
Commission in these matters. That means that I answer questions
in the House, rightly, as Chairman of the Millennium Commission
and I am responsible to the House for decisions that are made
by the Commission. If questions relate to the day to day administration
of the Dome, those are matters for Lord Falconer to answer in
the House of Lords and Janet Anderson, my Deputy Minister, to
answer in the House of Commons.
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