WEDNESDAY 12 JULY 2000
_________
Members present:
Mr Gerald Kaufman, in the Chair
Mr David Faber
Mr Ronnie Fearn
Mrs Llin Golding
Mr Alan Keen
Miss Julie Kirkbride
Mrs Diana Organ
Ms Claire Ward
Mr Derek Wyatt
_________
MEMORANDUM SUBMITTED BY THE DEPARTMENT FOR CULTURE, MEDIA AND SPORT
EXAMINATION OF WITNESSES
LORD FALCONER OF THOROTON, Minister of State, Cabinet Office; MR BRIAN
LEONARD, Head of Regions, Tourism, Millennium and International
Group, and MS CLAIRE PILLMAN, Head of Millennium Unit, Department
of Culture, Media and Sport, examined.
Chairman
309. Lord Falconer, thank you for coming to see us today with
your colleagues. I understand that it would be convenient for you to make
short opening statement and, of course, the Committee will be glad to hear
that.
(Lord Falconer of Thoroton) I am grateful. I am pleased to be
here again. Since I last gave evidence in February 1999, much has
happened in the life of the Dome. It has been a period in which the Dome
has encountered storms and difficulties; the Dome has made mistakes during
this period; in a project of this size, complexity and uniqueness it would
be inconceivable that it would not, but it has also achieved a lot. It
has received over 3 million visitors so far, 2.7 million of which are
paying visitors; it has consistently high visitor-satisfaction ratings -
the figures speak for themselves; 85 per cent of visitors are satisfied
with their visits and nearly four out of five people say they would
recommend the Dome to their friends. Many of the storms sprang from the
over-estimate of visitor numbers. The original business plan estimated 12
million visitors. We were not reaching these figures and by May it was
apparent that a major reduction was required. This produced the revised
budget on which NMEC is now operated. That budget has figures based on
actual trading and they are, in my view, achievable. What Peter Middleton
of Nomura in his evidence before you described as a tremendous achievement
has inevitably been overshadowed by that over-estimate at the beginning.
My hope is it will not overshadow what has been achieved. The Dome is the
most popular pay-to-visit attraction in the United Kingdom. It has high
customer satisfaction and it is the fifth most popular visitor attraction
in the world. But we must also remember that the Dome is about much more
than the creation of a successful visitor attraction in Greenwich. It is
also about regeneration. Locating the Millennium experience on the
Greenwich peninsula has been a key decision that has helped regenerate a
derelict and heavily contaminated site that had lain idle for more than
twenty years. English Partnerships has transformed the formerly derelict
site into an area that has already begun to flourish with a variety of new
developments including the Dome, innovative community facilities and fresh
ideas which are creating an exciting new urban quarter for London. The
legacy is in its last stages and will provide a permanent future for the
Dome. The transformation of Greenwich of which the Dome is a focus
continues. It has been a stormy road and the storms will, I am sure,
continue but the prize of a successful exhibition for the year, a permanent
legacy and a regenerated Thames gateway is attainable and worth fighting
for. I believe in time the project will be judged to be a success.
310. You said it is the fifth most popular pay-to-visit
attraction in the world. Can you tell us what the other four are?
(Lord Falconer of Thoroton) Certainly, yes.
Mr Fearn
311. Good morning. Could I ask who would be responsible if the
Dome became insolvent, and what is your liability on that?
(Lord Falconer of Thoroton) If the Dome became insolvent it
would be a matter, ultimately, for Government to bail it out in some way or
another. However, the position would not be reached where the Dome was
insolvent. It has always been monitored extremely closely and we have
only proceeded on the basis that the Dome can continue successfully to the
end of the year 2000. It would not be right that creditors who dealt with
the Dome would not be sure that they would get paid at the end of the day.
312. So you would not have personal liability; it would be the
Government?
(Lord Falconer of Thoroton) I would not have personal liability
but that would be normal on the basis that the shareholder is not normally
personally responsible for the debts of a company.
313. Now Jennie Page told us the budget actually works as a
balanced budget of around 11 million visitors, and you have already
mentioned that in your opening statement. Would the government have
decided to continue with the project if the original figures, shall we say,
on the business plan had forecast only 6 million?
(Lord Falconer of Thoroton) If the original budget had been
based upon 6 million visitors then obviously there would have been a lower
figure in terms of revenue and I think what would have happened is that the
government - though I cannot tell because it was both the previous
government and this one that made the relevant decisions - would I suspect
have decided to go ahead but with a different sort of plan, because if one
knew one was going to get less revenue from visitors, one would have cut
one's costs in particular areas and that would have led to a different sort
of proposal from the one that went ahead. Maybe it would have been the
same in concept but with different elements to it.
314. So should there have been more future planning on that
balanced budget, as it were? Should there have been two or three balanced
budgets waiting for those figures?
(Lord Falconer of Thoroton) Well, a lot of work went into fixing
what the right budget was before the decisions were made to go ahead. I
think Jennie Page in her evidence gave a detailed account of how the 12
million figure was reached. It was reached on the basis of advice taken
at the time; there were differing views about what the right figures were -
indeed, you will know that some people put the figure substantially above
12 million and I think the Millennium Commission put the range between 8
million and 12 million. We obviously got it wrong but it has to be said
it is quite difficult, I would have thought, to estimate how many people
are going to come to what is a very new, rather unique event like an
exhibition in the Dome. So, although we know with the benefit of
hindsight that it should have been lower, I do not think it is right to say
that it is obvious it was wrong at the time - far from it.
315. I like the Dome. I have been three times; my family enjoy
it and everybody I speak to does but did you have any influence at all in
the contents? Jennie Page at one time kept the whole thing under wraps and
it was all secret, which was probably a good thing because it built up
publicity which would not have been there before, but did you have any
influence in the contents, and do you think the content is right now?
(Lord Falconer of Thoroton) I think the content is right. The
number of views that you have about the content is reflected in people's
reaction to the Dome and in the press comment on the Dome. The vast
majority of people who go have a good time. They do not all like all of
it, but most of them like some of it and the vast majority like it overall.
If you divide the press comment from that which is talking about the
history of the Dome from that which is, as it were, reviewing the content,
many of the reviews are quite favourable. Just two weeks ago there was an
article by John Snow in the papers describing a large number of different
people in the Dome all having a very good time. Whether the contents are
good or bad is ultimately a subjective judgment. I think the most
compelling judgment about it is what you have just said, which is that the
vast majority of people enjoy it, which looks to me as if we have - broadly
- got it right.
316. And finally can I ask whether you have a hands-on effect on
what is happening now? Is it day-to-day or week-by-week when you meet or
when?
(Lord Falconer of Thoroton) The one thing I know is that people
from Westminster and Whitehall cannot run a visitor attraction. I am the
shareholder - not a member of the board or an executive. I keep fully in
touch with what is going on in the Dome because my responsibility is to be
accountable to Parliament for what is going on in relation to the Dome but
I make absolutely no attempt to run, or interfere in the running of, the
Dome.
317. But you go?
(Lord Falconer of Thoroton) I go regularly. I have been about
thirty-six times.
Chairman
318. Before I call the next member I would like to follow up the
very last question that Mr Fearn put to you and your response. You say
that you do not believe that Whitehall or Westminster can run a visitor
attraction. You came in part-way through; the structure is inherited from
the previous government; but looking back on it, what would your view be on
the proposition I put to you, namely, that the public sector bodies are not
appropriate bodies to run visitor attractions? A Royal palace or a museum
with a static exhibition inherited can be run probably quite well by the
public sector body but this kind of dynamic organisation is not something
that public sector bodies have got any experience on.
(Lord Falconer of Thoroton) Public sector bodies plainly do not
have the experience of running a thing like that because it needs a very
quick response; it needs, as it were, a long term commercial view, quite
frequently. The Dome did not start on that basis but eventually a
structure was reached where, because the private sector would not fund the
Dome in the first place and the nation wanted to do this, a structure
within the public sector had to be adopted. The structure that was set up
by the previous government which we inherited was one that, to a large
extent, sought to replicate that which would be the position in the private
sector with a shareholder, a board and a chief executive. We have tried as
much as possible to give effect to that structure by leaving the people who
are running the Dome to get on with it because obviously it is easier and
more effective in running a visitor attraction to do that.
319. No doubt everybody has done their best but I see a report
in The Times today of an interview with Mr Gerbeau in which he said that
only 4 per cent of the cost of the Dome had been put aside for the
marketing and, in his view, the figure should have been five times as high.
Now, right from the beginning of our five inquiries, this Committee has
made the point about marketing and, as I say and as you say, this is
something that was inherited as a structure just as it was a project, but
visitor attractions, theme parks, all the rest of them, spend huge amounts
on marketing and clearly those who are involved right from the very
beginning who were appointed long before the Dome was completed, simply had
no experience of what proportion of expenditure should be on marketing and
things like that. So I would take it you would agree that, should
analogous projects ever in any way be launched, this is a lesson to be
learnt?
(Lord Falconer of Thoroton) I could not agree more with that.
Marketing issues are very important. People were brought in at the
beginning of the year 1999 who had experience in visitor attractions
because we were gradually moving from the construction phase to the visitor
attraction phase. In relation to the marketing I suspect there was a view
which said that, because the Dome was such a big political issue - it was
on the front page and the inside page of the newspapers more than, for
example, Disneyland - that would bring it some profile beyond that which it
would normally get as a visitor attraction, but it is perfectly plain that
more money needs to be spent on marketing and, indeed, that is what we are
about to do.
320. This is probably the only visitor attraction there has ever
been that has been a political issue. Mr Gerbeau complains about it in
his interview today. Presumably it would have been political issue even
if the government had not changed at the last general election?
(Lord Falconer of Thoroton) I cannot conceive how you could have
a government decide that in excess of œ399 million worth of lottery money
should go into a particular project and that not be a political issue. In
a sense it is right that there be political scrutiny of it, though I
sympathise with what the chief executive is saying. He is not a
politician but somebody who is there to run a visitor attraction, and most
visitor attractions do not have, as it were, political noises-off going on
whilst the thing is running and I sympathise with his difficulties in that
respect.
Mr Wyatt
321. Can I take you back over the 12 million figure? I think
only one Millennium project hit its target audience and that is one of the
science exhibitions at Edinburgh, so I think most of the targets are
anticipated well over. If you wind that back, therefore, the whole way in
which either the tourist trade works or professors of tourism or the
analysts in this area got it wrong for Britain. Can you tell us a little
bit about the source of the analysis of the 12 million and where it came
from?
(Lord Falconer of Thoroton) Jennie Page went through this in her
evidence but it was the Millennium Commission in the first place who sought
to estimate what the right figure was. They sought advice not I think
from people involved in visitor attractions - though they had some
experience themselves. Between January 1996 and January 1997 various
figures were, as it were, discussed and the eventual figure of 12 million
was adopted. That was supported in part by various polling that went on
to ask people, "Would you be likely to go to something like the Millennium
Dome?", and that polling tended to support a figure in excess of 12
million. In addition to that polling, there was the experience of other
Expo type operations in other countries, though I do not think this is that
comparable to an Expo operation. So various sources were drawn on to try to
reach the figure. Quite sensible approaches are being taken to it, but it
is implicit in your question that this is a very difficult thing to
estimate.
322. And that Hanover is having similar problems which is
currently the Expo?
(Lord Falconer of Thoroton) That is what the newspapers say. It
does look as if they are having some problems but, again, what Hanover is
doing is something that is unique and innovative and therefore, again, it
is difficult to predict what the figures may be.
323. But do you surmise - and it is easy to have 20/20 vision -
that actually the larger events are, as it were, in the analogue world and
that families no longer want to go in the same way to these bigger events,
as nearly all the tourist attraction figures are down in the world for big
events like this?
(Lord Falconer of Thoroton) I do not know. If you compare the
things that do well consistently - in fact they do less well in numbers
than we do in Britain but if you look at Alton Towers and things like that
that are successful - they are successful I think because there is a clear
view in the public mind as to what you get when you get there. We are
doing more in numbers than Alton Towers but I think one of the reasons we
did not get to the 12 million, or will not, is because there is not a
clear picture in people's minds as to what they get when they get there.
324. Are you resolutely against it going on for any further
because it will lose more money between March and April next year?
(Lord Falconer of Thoroton) We always said the intention was to
have an exhibition that lasted for the year 2000. Nothing has happened so
far indicating that we should change that intention.
325. Can we move to the legacy? You are in the middle of your
discussions with Nomura and Legacy plc?
(Lord Falconer of Thoroton) Yes.
326. Can you tell us where that is?
(Lord Falconer of Thoroton) The minister is involved in a
presentation on Monday of the two bidders. There will be discussions
during the course of this week between ministers about the two bids and we
would anticipate that we would take a decision between the two in the very
near future, by which I mean in the next week or two. We might make it by
the end of the week and we will announce it as quickly as we reasonably can
thereafter.
327. There is speculation in the media that the government is in
favour of Nomura because Nomura has made an explicit - or implicit -
reference that it could take it over the next day, if necessary, which
would be politically expedient possibly but may not necessarily be the
right decision in the long term for the Dome. Would you like to squelch
those rumours?
(Lord Falconer of Thoroton) It is absolutely untrue that any
decision has been made; it is absolutely untrue that the government favours
one bidder over another because it might give some short-term benefit in
relation to money or taking the Dome over early. That is completely
untrue. There have been no discussions between the government and either
of the bidders about taking the Dome over early. The decision will be
made on the basis of what is in the best public interest and we have set
out in the rules relating to the competitions what the criteria are for
deciding who should take over the Dome and they are commercial
sustainability, regeneration, best use of the transport infrastructure,
best use of building, etc.
328. It seems to me, and I asked Jennie Page this, that but for
the tragic opening night, much of the hostility of the media would not have
happened. When we asked her that, she only knew of it on 21 December which
is going it a bit. When did you first know about it?
(Lord Falconer of Thoroton) She told me pretty soon thereafter,
about 21 or 22 December.
329. It seems to me the police may have overreacted on the
security side, treating it rather like a combination of a party conference
and a royal visit by ten Royals and therefore one of the problems was
actually the police were in control of security that night which caused
huge hiccups at the station end?
(Lord Falconer of Thoroton) The security operation on that night
was peculiarly difficult because it is a huge site and there were a very
large number of people who could potentially require guarding and
particular security. That made the operation very big indeed. The
events of 31 December have been gone over in quite considerable detail.
Everybody involved has apologised; it should not have happened. I do not
think one should let the events of 31 December detract from the fact that
quite a substantial element of the media, when they actually look at the
content, are favourable about the content and in a sense the media aspects
have been two-fold. One aspect has been the story of what is happening and
the other has been what is inside the Dome. A lot of the media are quite
favourable about what is inside the Dome.
Mr Faber
330. Could I follow up two questions? First of all, in response
to Mr Fearn you were talking about your own liability. The board are
liable for the debts of NMEC, and would be liable, would they not?
(Lord Falconer of Thoroton) No.
331. They would not be personally liable?
(Lord Falconer of Thoroton) No, they would not. Legally, a
limited company - which this is - is liable for its debts. The board is
only liable if they are guilty of some legal wrong like wrongful trading
----
332. But have the board as a board rather than individuals asked
for and received any guarantee?
(Lord Falconer of Thoroton) When a person takes on a job in a
non-departmental public body, the Treasury will give an indemnity to that
person. The form of the indemnity is that they will be indemnified
against any personal liability save that which arises from either reckless
or fraudulent trading.
333. I am not talk asking about personal liability but about
NMEC as a board asking for some kind of guarantee that, for instance, on 22
May they would not be allowed to go insolvent. Anything in writing? Any
phone calls requesting a guarantee?
(Lord Falconer of Thoroton) No. When they got into cash flow
difficulties in February and May, what they did was they made an
application to their bankers, as any business would, namely the Millennium
Commission, and sought further grant from them.
334. We will deal with that in later evidence. Following up
very briefly Derek Wyatt's last point about the opening night which has
been extensively dealt with, who took the decision that only the Prime
Minister should travel by tube from Westminster tube station?
(Lord Falconer of Thoroton) There were about 300 or 400 people
on the tube, along with the Prime Minister.
335. The Prime Minister and his entourage, shall we say, then.
Who took the decision that no one else could use that way of going?
(Lord Falconer of Thoroton) It was not an "entourage"; it was a
gathering of Millennium award winners so it was people from all over the
country.
336. Who took the decision?
(Lord Falconer of Thoroton) That was a decision made, I think, by
the Department of Culture, Media and Sport in relation to what arrangements
should be made. I think it is quite an important point, Mr Faber: you
mis-state the position if you say it was his entourage. Millennium award
winners come from all over Great Britain ---
337. As did all your guests?
(Lord Falconer of Thoroton) They were invited to come to a party
to celebrate the fact that they had won a Millennium award. They had also
been invited to the Dome for that evening which started with a party in the
Palace of Westminster and the best way to get them from there to the Dome
was by the tube.
338. But it was not the best way to get everyone else there?
(Lord Falconer of Thoroton) Well, everyone else was invited to
come to the Dome; they were not invited to come to the Palace of
Westminster first which is where the Millennium award winners were invited.
339. The Dome is a little like a character out of a John Wyndham
novel - it seems to devour people: Jennie Page, Mr Kane, Mr. Robinson,
Mr Ayling. Why do you think you are still doing the job?
(Lord Falconer of Thoroton) I think I have still got a lot to
contribute to the Dome. As I said in my opening statement, we have had
storms and controversies but I think it is a project that is basically
succeeding at a number of levels. As I have said it is the most popular
pay-to-visit attraction in the country; it has made a very substantial
contribution to regeneration; I am determined, as is the government, to see
it through to the end, to get the benefit from it.
340. So you are happy that, for instance, Jennie Page and
Mr Ayling have taken the blame for the failures?
(Lord Falconer of Thoroton) I would not say for one moment they
have taken the blame for failures, nor should they take the blame for
failures. Jennie Page's contribution was second to none. She delivered
the Dome on 31 December and I think there is practically nobody else in the
country who could have achieved that. What happened in relation to Jennie
Page was that, having delivered a big construction project like that,
different skills were then required to run a visitor attraction. What you
need to run a visitor attraction is somebody with experience in relation to
that. As far as Bob Ayling is concerned, he also made a very substantial
contribution. He was chairman right from the outset without any sort of
financial reward whatsoever, and he kept the thing together through very
difficult times. The moment there was a suggestion that the Millennium
Commission would like a change of chairman, Mr Ayling decided in the best
interests of the Dome he would resign, and he always put the interests of
the Dome first.
341. Am I right in saying that changes in the board of the NMEC,
including the chairman, are ultimately matters for the shareholder?
(Lord Falconer of Thoroton) Exactly. They are, yes.
342. So what was your involvement in Mr Ayling's removal?
(Lord Falconer of Thoroton) Mr Ayling, having heard that the
Millennium Commission were concerned about his role as chairman,
immediately resigned. He indicated to me that if he thought there was any
difficulty he was causing in relation to the Dome he would go and, having
regard to the interests of the Dome, I accepted his resignation.
343. You said earlier on in response to other questions that you
are not able to run a visitor attraction and you said you make no attempt
to interfere in the running of the Dome but in the run-up to the opening of
the Dome and the months preceding you were a very hands-on figure, and very
involved in preparing for the opening.
(Lord Falconer of Thoroton) Well, I was keeping informed as to
what was going on.
344. Did you attend board meetings?
(Lord Falconer of Thoroton) I attended board meetings, yes.
345. And you held regular meetings with members of the board on
a Monday morning, as I understand it?
(Lord Falconer of Thoroton) I would see the chairman and
Mr Michael Grade on a Monday morning.
346. And Mr Chisholm and Mr Freud?
(Lord Falconer of Thoroton) Sometimes Mr Chisholm, yes.
347. And Mr Matthew Freud?
(Lord Falconer of Thoroton) I do not recall. I have met him
from time to time; I did not see him on Monday mornings.
348. He did not attend your meetings on Monday morning?
(Lord Falconer of Thoroton) He did not attend my meetings on
Monday morning, no.
349. Did Jennie Page?
(Lord Falconer of Thoroton) No. I would see Jennie Page on
Tuesday mornings.
350. So what were you talking about with these other members of
the board that you could not discuss with Jennie Page?
(Lord Falconer of Thoroton) I could discuss all the things I
discussed with the members of the board with Jennie Page. It was a
completely transparent process.
351. Would it not have been easier if she just attended the
meetings?
(Lord Falconer of Thoroton) We all agreed that was the most
sensible way of dealing with it. It was a way of making sure that one
knew what was going on. Particularly as one got closer to 31 December one
was reaching a critical point in relation to the history of the Dome.
352. Can you give us a bit of a flavour of what was discussed at
those meetings?
(Lord Falconer of Thoroton) As we got to 31 December, there were
issues about how the various zones were getting on, how the discussions
with sponsors were getting on, what publicity material was being used and
also the detailed arrangements for what the show would consist of but it
was on the basis of it being reported to me what was going on.
Q : Could we move on now to the zone in particular and to the money
that has been spent on the Dome and the way in which the zones were
designed? First of all, you have probably read Mr Quarmby's evidence from
two weeks ago when I asked him about the way in which the content of the
zones was undertaken and I referred to a radio interview given by Mr Ben
Evans on Radio 4. Mr Quarmby clearly felt Mr Evans was perhaps playing a
little bit above himself when he said how important he had been. What
was your understanding of his importance in the design of the Dome?
(Lord Falconer of Thoroton) Mr Evans was one of the contents
editors.
353. How many were there?
(Lord Falconer of Thoroton) There were three.
354. So quite an important job then?
(Lord Falconer of Thoroton) Yes. It was a job of significance.
He had been appointed to that job by Jennie Page ----
355. With what qualifications to manage œ758 million?
(Lord Falconer of Thoroton) He had been a lecturer at the Royal
Academy of Art; he had been trained in that ----
356. I am sorry. You are saying that, having been a lecturer
at the Royal Academy of Art, he was felt suitable to be the gateway to
designers for a œ758 million project?
(Lord Falconer of Thoroton) It is very difficult to know who are
the right people to take on to do a job which, in effect, is a co-ordinated
role. There was a very large number of people involved in the design of
the zones and the interior of the Dome - people like Zaha Hadid, Eva
Jurikna, Branson Coates, Gary Withers ----
357. They were the designers?
(Lord Falconer of Thoroton) They were the designers, that is
right.
358. They had come to him with their designs?
(Lord Falconer of Thoroton) When there is a project like the Dome
going on there have to be people within the organisation who have some
experience of design matters who then deal with designs.
359. What was his experience of design matters? He had been a
lecturer at the Royal College of Art?
(Lord Falconer of Thoroton) For a number of years, that is right,
and he was somebody in a management role in relation to that but obviously,
when you are doing something like this, it is a unique experience.
360. He compared it to working for the Prime Minister during the
General Election campaign, or Mr Mandelson?
(Lord Falconer of Thoroton) I think you are very much
over-estimating his role as part of a team. The team was a large number
of designers contributing to the design of the Dome.
Chairman
361. Mr Faber has raised an important question. He was
appointed by Jennie Page?
(Lord Falconer of Thoroton) That is right.
362. Is there any implication whatever that either the Prime
Minister or the government or the Labour Party had any involvement in his
appointment?
(Lord Falconer of Thoroton) None whatsoever. Indeed, he had
worked for Jennie Page at English Heritage earlier. He was known to
Jennie Page.
Mr Faber
363. At the meeting two weeks ago I requested a breakdown of the
costs of the individual zones which NMEC have very kindly sent to us and
which I understand is commercially in confidence. The reason given is
that there are still final costings being negotiated with some of the
contractors so, of course, I will, as I always have, respect that
confidentiality but that confidentiality, as I understand it, only applies
to the individual costs of the various zones and I do not think the global
figure which is arrived at in the end need be treated as commercially in
confidence. In the original budget in the last set of accounts œ202.3
million was budgeted for the kitting out of the zones. By my maths,
having added up the various cost of the zones, the total I have come to is
œ142.56 million which is œ60 million short of the original budget. Now, I
do not think even the most ardent supporter of the Dome would suggest that
the zones have come in œ60 million pounds under the budget. Where has the
rest of that money gone?
(Lord Falconer of Thoroton) I would imagine part of the œ60
million was the contingency ----
364. I am coming on to that. So you think œ60 million was the
contingency?
(Lord Falconer of Thoroton) Part of it, yes, but looking at page
2 of Mr Gerbeau's letter, there is a figure that is a total; on top of that
figure there are the two zones that were nil in the budget. What I would
like to do, if I may, in relation to this is write to you because the
precise detail of that ----
Chairman
365. Would you write to me?
(Lord Falconer of Thoroton) I apologise. Yes, I will write to
the Chairman.
Mr Faber
366. Yes, and what I actually requested of Mr Quarmby was a
breakdown of the cost of the zones against the original budgeted cost -
what was intended to be spent as against what was actually spent. Now
since then, in the new set of accounts ----
(Lord Falconer of Thoroton) Which are?
367. The new business plan which Janet Anderson gave in a
written reply to my colleague James Gray a couple of days ago, this
particular budget has risen to œ240.2 million, so we are now œ100 million
short not just œ60 million. Is that all contingency as well?
(Lord Falconer of Thoroton) Again, it would be wrong for me to
start trying to describe the figures here. Can I write to the Chairman in
relation to the figures on that?
368. If I could go on, the other thing which I requested was the
cost of the Richard Rogers contract within the global figure which again in
the original accounts was œ289 million and has now dropped slightly in the
new business plan to œ271.2. I think Mr Gerbeau may have misunderstood me.
My interest in Richard Rogers' contract was not his contract per se, but in
the percentage it made up of that global figure. Again, I would be
grateful just for the sum and a breakdown of how that œ271.2 million has
been arrived at?
(Lord Falconer of Thoroton) These detailed questions about the
figures look to be legitimate questions but they are, in a sense, follow-up
questions to the ones you were asking of Mr Quarmby and Mr P Y Gerbeau and
it may be more appropriate for them to write with the answers rather than
myself because they are the ones with the hands-on operational finance
responsibility.
Chairman
369. Perhaps when you are sending that material, Lord Falconer,
you can tell us the date when the Richard Rogers contract was signed?
(Lord Falconer of Thoroton) Yes.
Mr Faber
370. Similarly, on the issue of contingency, Mr Quarmby at the
very beginning of his evidence in reply to Mr Fearn said there was a
revenue contingency of about œ40 million. In fact it was in the accounts
as œ41 million but since then that has been corrected by NMEC and what he
meant to say was that it was a cost contingency. As I understand it there
is roughly œ40 million of cost contingency and a further œ41 million of
revenue contingency.
(Lord Falconer of Thoroton) That is correct - or was. There
was a contingency in the original budget. I cannot tell you the precise
amount that is still left but that contingency has now I think, to a large
extent ----
371. So what you are saying on this is there was roughly an œ80
million contingency split between cost and revenue?
(Lord Falconer of Thoroton) That is right.
372. Hence Mr Gerbeau's comment that you would normally have
roughly 10 per cent of your overall contract as contingency?
(Lord Falconer of Thoroton) Yes.
373. When I arrived he said the cost contingency had been spent,
and I would be grateful to find out how the revenue contingency has been
spent as well?
(Lord Falconer of Thoroton) Certainly. Part of the revenue
contingency was spent on the million school children and some of it was
dealt with up-front before we started because ----
374. So a lot of the revenue contingency was spent on ----
(Lord Falconer of Thoroton) "A lot" is the wrong description,
but some of it was.
375. If we could have a breakdown of that that would be very
helpful. Finally, Chairman, there was an article in the Sunday Telegraph
at the weekend concerning the legacy and concerning the amount of money
that will come back from the legacy to the Dome, originally budgeted at œ15
million?
(Lord Falconer of Thoroton) I think the œ15 million was put into
the figures on the basis that what was going to happen was that the Dome
would be dismantled at the end and there would be no sale of any aspect of
it. So the œ15 million I think was something like cost of decommissioning
which was taken off which was the minus, and the plus was what you would
get for various things inside it.
376. But the article in the Sunday Telegraph says only œ15
million was originally meant to go to the Dome's budget and now the Dome
will get about œ70 million. Is this inaccurate?
(Lord Falconer of Thoroton) Yes, (a) because it is not known
what the bidder will pay for the Dome because no decision has been made;
secondly, it is inaccurate because no decision has been made as to the
split between NMEC, who, as it were, own the Dome and English Partnerships
who own the rights in the land. It is a great bundle of land and Dome
that is being sold.
377. So the anonymous minister quoted in the Sunday Telegraph as
saying, "The voters have never heard of English Partnerships. They will
not care two hoots if it does not get the money", was speaking out of turn?
(Lord Falconer of Thoroton) I would very much doubt if that is
what was said. It certainly does not reflect the position.
378. Well, you know newspapers. It is in inverted commas which
normally means someone has said it.
(Lord Falconer of Thoroton) I would agree with that, Mr Faber,
yes!
Ms Ward
379. When Mr Gerbeau came before the Committee, he made it very
clear that, as far as he was concerned, NMEC had sufficient funds to get
them to the end of the year. Are you as confident?
(Lord Falconer of Thoroton) To get to the end of the year
depends on three things, (1) revenue, which means the visitors we are going
to get; (2) costs, and there need to be some cost savings, obviously; and
(3) what we get from the legacy. I am confident that there will be enough
from those sources to make sure we meet our budget and get to the end of
the year.
380. So you do not anticipate a return to the Commission to ask
for more money?
(Lord Falconer of Thoroton) I think it would be extremely
difficult now for there to be any suggestion that there be any additional
payment to the Dome. It has to get by, as it were, out of its own
resources. I think the legacy competition, which will inevitably involve
there being an agreement to make a payment to the Dome, will mean that it
will have an asset which it can then use, as it were, to make sure it can
get through to the end of the year.
381. So can we take it there will be no return to the Commission
to ask for more money?
(Lord Falconer of Thoroton) The three sources I have indicated
will make sure we get to the end of the year.
382. When Jennie Page came before the Committee, her comment was
that she had suggested to ministers that it would be in their interests and
the interests of the Dome if there was a little bit more space between
them. Were you part of those discussions?
(Lord Falconer of Thoroton) Jennie and I had many discussions
about the role of the politician and the role of the people involved in the
Dome. Everybody, including myself, recognised that the less political
controversy there was and the more there was a focus on it being a visitor
attraction the better from the point of view of the Dome, but we equally
recognised - and Jennie and I were in complete agreement on this - that try
as one might, it very frequently was impossible to avoid political
controversy about the Dome. Jenny said in her evidence that, right from
the inception of the Dome, it had been a matter of political controversy
because it had been associated with individual members of both governments.
We both wanted it stepped back from political controversy but we found it
was not altogether possible.
383. Would you have found it easier to allow the design team to
take full responsibility for the contents without you being involved?
(Lord Falconer of Thoroton) They were the people who decided on
the contents. They would keep us informed as to what was going on in
relation to it but they were the people actually designing it. This was a
Dome company-driven design process. The problems, I suspect, were not
about them making the decisions about the designs; it was the fact that
there was lots and lots of criticism about the decision to start in the
first place with the Dome and then what happened subsequently in relation
to the expenditure of money.
384. Did you ever veto any of the contents put forward?
(Lord Falconer of Thoroton) No, I never vetoed any of the
contents. I certainly discussed them; I never vetoed any of them.
385. In that discussion, did you put forward very strong
opinions about the contents?
(Lord Falconer of Thoroton) No, I did not have very strong
opinions about the contents. I expressed views about the contents but I
certainly did not veto them.
386. So you think the question of contents was not a matter for
the politicians, but very much the product of the design team?
(Lord Falconer of Thoroton) I think the detailed design of the
contents is plainly a matter for the design team. Obviously we,
politically, are accountable, just as the previous government was
accountable, for the Dome overall and one of the things I am accountable to
Parliament for is what is actually in the Dome but that does not mean, it
seems to me, that the politicians or officials should seek to try and, as
it were, take part in designing what is in the Dome.
387. PY Gerbeau has suggested in his interviews over the weekend
that at the end of the year he will "tell all", and will perhaps name those
people he believes were responsible for the problems that the Dome has.
Are you worried?
(Lord Falconer of Thoroton) I am not worried, no. I think PY is
completely committed to making the Dome a success. He has come from a
pure visitor attraction background into something that has a very strong
political controversy around it and I fully sympathise with PY having not
only to run the Dome on the day-to-day basis but also to deal with all the
politics that go with it.
388. So there is no term in Mr Gerbeau's contract requiring him
to keep confidentiality at the end of the day?
(Lord Falconer of Thoroton) No. There will be the usual
commercial confidentiality but he will be free to speak at the end of the
year.
389. And finally, when Jennie Page was here, she mentioned the
problems of the school children and the additional one million free tickets
that were given to school children. The suggestion was that that was a
late idea and that it caused some of the problems in terms of visitor
numbers?
(Lord Falconer of Thoroton) Well, the million free school
children was agreed at the time the price structure was agreed for the Dome
by which I mean what people paid to come in and I think that was agreed in
or about April or May of 1999. It was agreed on the basis that we were
determined that, whilst the Dome did have to get revenue from visitors, it
should, within that context, reach out as much as possible to people who
might not otherwise think of coming to the Dome. If we made available a
lot of free school children places that would lead to schools which might
not otherwise think of it agreeing to arrange school trips to go and that
is what has happened in large measure. Whether the school children who go
on those free trips then go back and tell their parents "Let's go to it",
or whether they do not come on a paying basis, I have no idea. Jenny said
anecdotally there was some suggestion that they did not come back on a
paying basis; some people I have spoken to - and, again, it is only
anecdotal - say the children, once they have been, urged their parents to
go, so it is impossible to tell what the effect on the visitor numbers has
been but the reasoning behind it was a determination to reach out to people
who would not otherwise go to the Dome.
390. But the figures we got from Mr Gerbeau suggested that, of
the million free school tickets, only 700,000 or so had actually been taken
up. Are you a little concerned that those 300,000 free places for
children have not been taken up?
(Lord Falconer of Thoroton) Once one sees the figures go down
from the original estimate of 12 million to the lower figures that are now
estimated it is not perhaps surprising that the free school children go
down as well in relation to that. I can also understand the Dome being
keen to market particularly the œ8 school children trip at the moment - for
reasons that are obvious.
391. Quite, except if you are running a school budget you will
not want to pay œ8 a head when you are entitled to free tickets?
(Lord Falconer of Thoroton) No, but the free tickets are still
available. Anybody who wants a free school children trip is able to apply
in relation to it.
Chairman
392. It is worth listening to some of the questions put and some
of the answers to take advantage of your presence to set certain things in
context, is it not? For example Claire Ward has just asked about free
school trips and some of these have been discounted from the attendance
fees figures. What do you believe the reaction of some newspapers would
have been if you had said there would not have been any free school trips?
(Lord Falconer of Thoroton) I think there would have been an
unfavourable reaction to that and it would have been a matter of criticism
of the Dome.
393. Secondly, I questioned you earlier - and I questioned
Jennie Page and Mr Gerbeau as well about this - about the problems with
regard to visitor attractions but is it not a fact that what you have was a
totally unique challenge; that Disneyland, Paris, run by people with huge
experience of theme parks, was such a disaster to begin with they had to
close it down and start it all over again, whereas you had to start on a
given date, keep going and keep going for a whole year. Others do not do
that. Again, if one looks at some of the Millennium projects started
under the previous government and mid-1990s, some of them were way over
budget and over timescale. This was delivered on budget, and to time.
Compare that with the British Library, for example.
(Lord Falconer of Thoroton) Yes.
394. While I certainly would not for a moment minimise the
problems and the mistakes that have been made, have not some of those
mistakes stemmed from the unique nature of this project?
(Lord Falconer of Thoroton) Yes, and also that what the Dome has
been trying to do is build an attraction, build revenue and build visitor
numbers in a year without the sort of brand that, for example, Disneyland
has. Even Disneyland, which has a very clear identification in the public
mind as to what it was, took a period of three or four years to get its
Paris operation to a level where it was a thriving commercial attraction.
I think the context you set, Chairman, is very important because what we
have achieved is we are now ahead of any other pay-to-visit attraction in
the United Kingdom, so we have already received more paying visitors in the
year 2000 than the next most popular pay-to-visit attraction in the United
Kingdom, and I think that is quite an achievement.
395. When I visited Disneyland I found I did not go on a lot of
the attractions because the queues were too big. A successful visitor
attraction has queues and this project has been attacked, on the one hand,
for having queues too big and, on the other, for not having queues at all?
(Lord Falconer of Thoroton) That is right. We have tried to keep
the queues down and Mr Gerbeau has made real progress in keeping the queues
to a minimum. I know you have all been, or most of you have, quite
recently and it is a pleasant, easy experience for the visitor.
396. And again, it would be interesting to know, we were told by
previous witnesses that the impractical visitor targets -- 14 million all
told, 30 million at one stage -- were all started when the Dome was
conceived, long before it was inherited by the present government. Again,
without underestimating in any way the errors that have been made and the
problems that have arisen, is it not a bit barmy for anybody to start off
with a huge figure for this attraction? I am Jewish and we have a horror
of the evil eye. We will not forecast what is going to happen in case the
evil eye descends on us and we are judged on that basis, and those 30
million and 40 million and 12 million figures which you inherited you are
going to be judged by.
(Lord Falconer of Thoroton) That is right. The 12 million
figure was there by March 1997 when the budget was put. Ultimately, though,
a figure had to be put on it because budgeting had to be done before the
venture was embarked upon.
Mr Keen
397. Could you help us through the decision-making process? How
was it decided that there would be a company to run it?
(Lord Falconer of Thoroton) The structure of a company with a
board, an ordinary Companies Act company and a shareholder - the
shareholder to be the government - was decided by the previous government.
It was decided that that structure would be adopted because, although the
previous government had made efforts to get genuine private sector
investment into running the Dome, they failed to do it. It was therefore
decided that it would be dealt with by this private type structure with
money coming from the Millennium Commission. That was decided in 1996.
398. When was it decided that the chief executive should be
Jennie Page?
(Lord Falconer of Thoroton) There were a number of chief
executives before Jennie Page. Jennie Page became the chief executive in
January 1997 and she came over from the Millennium Commission where she had
been the secretary or the director of the Millennium Commission before
that.
399. But who decided that there should be one chief executive to
run the whole show?
(Lord Falconer of Thoroton) Well, that was a decision taken by
the board of the Dome company in January 1997.
400. Why did you not come to the decision that there should have
been two chief executives, one to get everybody ready by 31 December -
which Jennie Page did extremely well and everybody accepts that - but
another chief executive for the content and from the artistic and the
customer attraction point of view? Lots of people are beginning to say
that should have happened. It is easy after the event but do you agree
that it would have been better? I think everybody was exhausted. A
target date like 31 December was a tremendous date to meet with the whole
of the world looking at it so naturally people were going to be exhausted
even if there had not been problems. Would it not have been better if
there had been another team already up and running and having started?
(Lord Falconer of Thoroton) I think there are two separate points
there. First of all, should we have had some sort of creative director to
deal with the creative aspects?
401. In fact, somebody like and alongside Jennie Page with
certain responsibilities, 12 months before the opening.
(Lord Falconer of Thoroton) We had people who were experienced in
running visitor attractions who were part of the team. It became obvious
in the early part of this year that the skills you need for running, as it
were, a big construction project were totally different from the skills
needed to run a visitor attraction. I think it would have been, with the
benefit of hindsight, much better if one could have, as it were, transitted
to that position with effect from 1 January in the year 2000, and with the
benefit of hindsight I think you might be right in relation to that.
402. It is easy with hindsight, but we did have a witness who
said that what it lacked was somebody who was experienced in visitor
attractions. The Chairman has outlined very well that Disney Paris failed
anyway, with all the experts, but, nevertheless, we did have a witness at
the beginning who said that there was a lack there.
(Lord Falconer of Thoroton) During the year 1999 there was an
operations director who had experience of being the operations director of
a visitor attraction, but I think what was needed was that the leadership
at the executive level of the company from the moment the visitor
attraction opened should be led by somebody who had that experience and who
had that focus. What P-Y has done - and you can form your own view about
this having met him - is focused on running the business with a focus on
making sure that it runs to help the visitor. In a sense, that is what the
focus should have moved from, from the end of the construction site to the
first opening, and that is what happened when P-Y came in February.
403. Probably 12 months too late, many people would say. In a
way, because the decision was taken much too early, it looked as if Jennie
Page is being blamed for something that ----
(Lord Falconer of Thoroton) She is one of the major architects of
the success of building the Dome and getting it there and on budget.
404. Can I move on to the legacy, before we run out of time.
Over the period of the different inquiries we have had we have duly made
reference to the value of your shares, asking you when you came if you had
an added increase and added value in the four or five weeks since you had
taken over. I asked Peter Mandelson at the beginning, because I reckoned
(and, again, it was a joke) that the Stock Exchange would have stopped the
company trading ... but then it got to the point where it seemed to be
fine. If I come back to the value of the share - again, in joke terms -
really, the value of the share now is what - putting aside the trading to
the end of this fiscal year, which is almost decided for us and nobody is
going to change it too much - the value of the share is what the successor
company pays for it. It seems so plain to me that the value of the Dome is
not the roof and the structure, it is the advertising value; most of its
value is because of the amount of publicity there has been. I cannot see
that one of the companies who is going to try and attract high-tech
business into the Dome can get any more than one-twenty-fifth of the value
that a company using the Dome again as an icon to attract customers to come
could. I would have thought that one company would have been willing to
pay 25 times as much as the other. Is it not true that a commercial
company will come and operate - they are only drawn in by the prospect of
good business, but I cannot see what difference it makes to high-tech
companies whether they are under a dome or in a factory unit north of
Wembley, whereas the other company relies completely on the world-wide
knowledge of the Dome. I would have put the value at 25 times different.
(Lord Falconer of Thoroton) I obviously cannot comment on what the
particular bids are, at the moment. I agree with your basic proposition
that the value of the Dome is, at least in very substantial part,
determined by how the commercial market views it as being a commercial
draw. One bid, as you know, is a visitor attraction and, inevitably, if
there is an existing visitor attraction there that is attracting 5 or 6
million visitors in a year, that means there is an already established
market that they will be attracted by. However, the other bid which is
for, as it were, a 24-hour city, with high-tech businesses and offices
there, they are also very influenced by the fact that the Dome is a place
that people have shown that they are prepared to come to; they have shown
they are prepared to come to it because they are attracted to the idea of
the Dome and because of the good transport infrastructure, and because it
is a famous, iconic building. That, as has been seen from the bids (I
cannot give you the detail of it, for obvious reasons) has been shown to
have real commercial value. Because of what has been achieved so far, in
terms of visitor numbers, the market believes that the Dome is something
that is an attractive commercial proposition - whether it be as a high-tech
business, 24-hour city, or whether it be a visitor attraction.
405. You are going to get a lot of money for the shareholding.
(Lord Falconer of Thoroton) I would not like to speculate about
that, but I can tell you that the bids are good, strong bids. I notice
that there is another person trying to get on to the short-list, and I take
that as an indication that the market out there is keen for commercial
reasons to get hold of the Dome. Could I make it clear that I get no
money, by the way, personally, from the share. As I am not personally
liable. When I last came before this Committee I said that when I first
became a shareholder I was asked to sign a document transferring the share
out of my possession. This was on the day I got it. I asked why that was
and they said "Oh, well, if you were killed you would not want your wife to
inherit the share of the Millennium Dome". The next day in The Daily
Telegraph there was a headline which said "Dome Minister in death duties
dodge".
Chairman
406. On the other hand, it would be quite nice to have the Dome
in the family.
(Lord Falconer of Thoroton) My family would agree with that.
Mrs Organ
407. You said that you do not believe that the public are clear
about "What do they get when they get there", and that that has been one of
the problems. When you were first appointed as Minister to oversee the
Dome, did you have a vision about what it was that people - the public -
were going to get when they got there? What was this visitor attraction,
this experience - apart from the iconic building - that they are actually
getting?
(Lord Falconer of Thoroton) The vision was of an experience that
was going to be both educational and inspirational but, above all, fun. It
was going to express, and does express, what the country could achieve in
the 21st Century, and it would do it by a vast range of things like the
Show and the various zones that would focus on the various aspects of life,
like Journey - which is travel - or Self-Portrait - which is looking at
Britain today.
408. You had in your mind a clear vision of what the public were
going to get?
(Lord Falconer of Thoroton) Yes, because it was described to me.
The comparison I was making was that if you compare it with Disneyland,
people when they think of Disneyland think of, as it were, white knuckle
rides. We are not offering a theme park like that. Nor are we offering a
static museum. It is something innovative, new and unique, and it is
because it is new and different from a museum or a theme park that it is
difficult to create a picture in people's minds of what it is.
409. Are you satisfied that what we have ended up with is very
close to that vision?
(Lord Falconer of Thoroton) Yes, yes.
410. Did you have any influence, then, on the design? In
earlier questioning you said you had views but you did not veto anything.
How could you deliver your vision if you did not have an influence and an
input on the content of the Dome?
(Lord Falconer of Thoroton) The contents of the Dome and what the
vision was had been set, indeed, before this Government came to power. It
was there in the plans for the Dome, which were, as it were, finally put
down in detail by March 1997. They were taken up by this Government, and
what I have described - namely, something that is inspirational ----
411. So it was not your vision; you inherited it because it was
already in place?
(Lord Falconer of Thoroton) Yes. You asked me what I thought was
going to be in the Dome, and what my understanding of it was, and that was
what I thought.
412. You took the inherited vision and that sort of fitted what
your vision was, and you believe that that is what we have.
(Lord Falconer of Thoroton) I became a shareholder in a process
that was going on, as it were.
413. You say you did not veto anything, but you did express some
views. Did you ever express any view about the cost of the Body Zone at
21.24 million? Let us go back to what Guy Hand said in evidence to us when
he said the cost of the Body Zone was œ30 million? Did you ever express
anything about the cost of some of the exhibits in the zones?
(Lord Falconer of Thoroton) My responsibility in relation to it
was to ensure that the budget was kept; that the costs were kept within a
reasonable budget. Precisely how much was spent on one thing or another
was a matter for the company to decide. The Body is one of the most
significant - in terms of public knowledge - zones in the Dome, and I can
see that more money would be spent on something like that which is, both in
its external appearance and in its internal appearance, one of the things
that draw people to the Dome. It is not surprising that it was, perhaps,
more expensive than other zones.
414. I would say to you, would you not agree, it is very large
and very obvious when you go into the Dome, but the experience of walking
through takes you 2, 3 or 4 minutes, if there are not many queues, and I do
not know if it made the earth move for me or if I learned a huge amount
about how my body works. Would you agree?
(Lord Falconer of Thoroton) I do not know about what you learned
about how your body works, but I think the whole conception is very
spectacular. I think what you get when you go into the Body Zone is an
experience which is both educational but, also, exciting, amusing - unique.
There are different views about it. Some people absolutely love it, some
people are really terrified when they see that huge heart above them.
415. Are all the zones good value for money?
(Lord Falconer of Thoroton) They appeal, very many of them, to
different people who come to the Dome. I think they are good value for
money because, when you look at the whole grouping of the zones, they are
something that has provided the vast majority of people who come with a
very good day out.
416. Just two other small questions. You said that you wanted
to give the million free school tickets to reach out to those who otherwise
would not have gone. Was it your decision, then, that the million school
tickets should also be issued to children from independent schools?
(Lord Falconer of Thoroton) It was a decision made by the Dome
that that was the position, and it was done on the basis that it would not
be either possible or lawful to discriminate between independent and non-
independent schools.
417. Do you think that was the right decision, when we are
talking about access?
(Lord Falconer of Thoroton) Yes, I think it was.
418. Children that have gone from my constituency and have taken
free tickets tend to be children that, for one reason or another, would not
have been able to afford to travel all the way from the Forest of Dean. Do
you think it was right that children from independent schools in Wimbledon,
for instance, would get free tickets?
(Lord Falconer of Thoroton) I think your experience in your
constituency is similar to the experience in most of the country where it
is schools that would not otherwise have thought of going because there was
a charge, but which, as a result of the free school offer, decided to
consider it and then decided to go.
419. You are happy about that decision?
(Lord Falconer of Thoroton) Yes, I am happy about that decision.
420. Lastly, since on the doorstep of the Dome is London and the
millions of people that reside in London, I wonder if I could just mention
to you that we had a memorandum from Dr Peter Brierley who lives in South
London. He was saying that it is all right for people coming from my
constituency, from the Forest of Dean; you can get public transport and you
can go on the Jubilee Line now that it is open to all of us. However, he
says, for him he had to catch a bus to Lewisham, then the Docklands Light
Railway to Canary Wharf and then change on to the tube. "The cost of
travel was much greater than if I had gone by private transport. While I
understand the need to ensure that public transport is used more ... " - he
is saying, effectively, that for those millions of people on the doorstep,
that you would like to be the repeats to the Dome, it is so difficult to
get there if you live locally. Was this problem ever thought about? Was
it ever addressed how we might get people to come again and again on the
doorstep, but that the transport network was terrible, unless you were
coming from a distance and going on the Jubilee Line?
(Lord Falconer of Thoroton) It was thought about, and there was,
for example, a fixed link connecting Charlton to the Dome put in, increased
bus services were there and the Jubilee Line extension is there, which
helps to some extent. It was certainly thought about and I am very
disappointed to hear the gentleman describe the difficulties he has had. I
think if one goes down there one discovers the transport links have been
improved.
Miss Kirkbride
421. I would like to take up a few things on what has been said
already. I am fascinated by the idea that you wholly inherited the idea of
the Millennium Dome from the last Conservative Government. I have to say
that, for my part, a lot of the New Labour sloganising of the Dome was
viewed as anathema to anyone in my party. I also think probably your
suggestion is an anathema to Peter Mandelson, who, of course, was the first
architect (?) of the Dome. Would he be terribly pleased to hear that he
inherited the idea?
(Lord Falconer of Thoroton) The question Mrs Organ asked was about
the overall vision, about what should be in the Dome, and I answered that
by reference to it being educational, inspirational and, above all, a good
day out. I did not think that there was either political sloganising in
relation to the vision in March 1997, just as there has not been political
sloganising since then.
422. You quite rightly said that the last Tory Government had
difficulty in raising sponsors. Of course, the reason was because the new
Labour Government threatened they would not proceed with the Dome. Were
you ever involved in discussions about not proceeding with the Dome when
you first started out in this job?
(Lord Falconer of Thoroton) No.
423. Can we also clarify something else about the actual
numbers, which lie at the heart of the problem of the Dome, as we have been
discussing? When Mr Quarmby was here last week, he was drilled in detail
on the numbers and he told us that in early 1997 the figures for people
coming were 10 million, and that in a later part of 1997 they had been
revised to 11 million. Could you confirm that?
(Lord Falconer of Thoroton) In January 1997 it is 10 million, on
12 May 1997 the figure goes up to 12 million.
424. Thank you. Obviously, the number of visitors lies at the
heart of whether or not the project is going to be successful. You said
earlier that you are now up to 2.2 something million paying visitors and
still looking towards a figure of 6 million by the end of the year. We are
seven months into the year. Are you completely satisfied you are going to
reach that target?
(Lord Falconer of Thoroton) I am confident it is an utterly
reasonable target, because you would expect more visitors to come in the
second half of the year rather than the first half of the year. Obviously,
the first part of the year - January, February, March - is notorious as
being bad for visitor attractions. The second half of the year contains
the long summer holidays, and, also, there may be an effect towards the end
of the year where people come because they believe they will be losing
their chance to see the exhibition, because it will close on 31 December
2000. I think it is a reasonable assumption to say that you would expect
more in the second six months than the first six months. We have had 2.7
million up to the middle of July - so it must be 2.6 something million up
to the end of June - and that balance of 3.4 looks a reasonable balance.
425. If it is clearly not going to be reached by, say, October
time, is anyone going to revise it?
(Lord Falconer of Thoroton) The decision about the numbers of
visitors we get will be determined by the market. Why they do not come we
will see when we get there.
426. So no one will have any responsibility if the figures do
not come about?
(Lord Falconer of Thoroton) I think we all have responsibility -
the people who have been involved in running the Dome.
427. Who will take that responsibility ----
(Lord Falconer of Thoroton) When people do things like the Dome
and they, as it were, say "This is what I think the visitor figures are
going to be", I do not think it is right to keep saying "If you do not get
them you are going to have to resign". People have just got to try their
best to achieve the targets that they set. Otherwise you make everybody
ludicrously risk-averse. I think the people who have been engaged in
running the Dome on a day-to-day basis have been brave, have been, in very
large measure, sensible and reasonable, and I think it is wrong and unfair
always with the benefit of hindsight to start saying "You got that wrong,
and you got that wrong".
428. Some people have introduced that matter, of course, and
that is another story. Again, at the heart of the problem is the actual
amount of public money that goes into the Dome. Can we just clarify where
the money has come from recently? The œ29 million that was handed over by
the Millennium Commission to keep the Dome afloat earlier this year. What
pot did that come out of? At what expense has it been drawn?
(Lord Falconer of Thoroton) That came from the Millennium
Commission. It has not cost any existing project anything at all. It was
there from the money diverted - not diverted, it comes from the proceeds of
the Lottery, and that is where it came from.
429. What is the opportunity cost? Where would it have gone had
it not gone on the Dome? What was that earmarked for?
(Lord Falconer of Thoroton) It was not earmarked for anything.
430. Was it not for the New Opportunities Fund? Is it not the
fact that by the end of the year the Millennium Commission is not likely to
get any more money because the Millennium is over, and that all that money
will be diverted into a fund for projects which, I think, is called the New
Opportunities Fund?
(Lord Falconer of Thoroton) No, that is not right. The position
is that the Government went ahead on the basis that any money that went to
the Dome would not damage any existing programme, including any existing
programme of the New Opportunities Fund. When the announcement was made
about the œ29 million that was given in May, the New Opportunities Fund
also made a statement to the effect that there was no project that was
affected by the œ29 million going to the Dome.
431. That would have been put into some other project, surely?
(Lord Falconer of Thoroton) Insofar as there were projects that
had not yet been thought of, yes.
432. So œ29 million came out of the Opportunities Fund, which
whilst not having been given to an existing funding opportunity, would have
been given to a future funding opportunity in health and education but then
it went to the Dome. That, surely, has to be logical.
(Lord Falconer of Thoroton) It has not come from the New
Opportunities Fund. What has happened is that money continues to go from
the Lottery to the Millennium Commission. The Millennium Commission give
money to the Dome. All of the New Opportunities Fund projects that are
earmarked are completely unaffected. The New Opportunities Fund is going
to go on, as it were, indefinitely. It is impossible to think of a project
that might have been financed that would not be financed, because in a
sense all that is happening is that one continues to give money to the
Millennium Commission for a bit longer than one otherwise would. There is
no project, either now or in future, that will be affected by it.
433. That is a curious way of looking at it. Nevertheless, œ29
million that would have gone to the New Opportunities Fund has not gone
because it has gone to the Dome.
(Lord Falconer of Thoroton) It is money continuing to go to the
Millennium Commission. That means that that œ29 million does not go to the
New Opportunities Fund, but it does not affect any of the Opportunities
Fund's projects because they have all been given money, and money will
continue to go to the New Opportunities Fund indefinitely from the Lottery.
If there is a project down the line that has not yet been thought of, there
will be money for that because they will get their money from the Lottery
for that project. It is a timing issue, rather than ----
434. But it is œ29 million of jam today that my constituents do
not have now because it is going to the Dome. I think that is, perhaps, a
fair summary. Can we ask about the response to Mr Wyatt? You spoke about
the legacy and what is going to happen to the bidders that actually succeed
in taking over the Dome at the end of the year. Can we clarify: is it
definitely the end of the year? There is no question that the person who
takes over the Dome will do so before 1 January 2001?
(Lord Falconer of Thoroton) It is definitely the end of the year.
NMEC, the Dome company, will continue to run it until 31 December.
Thereafter, on 1 January, the successful bidder will take over.
435. Then, in relation to the money that either bidder is going
to pay for taking over the Dome, it seemed to me that what you said was
that that money will, in fact, be used to keep the Dome afloat between now
and the end of the year, if your cost projections go awry.
(Lord Falconer of Thoroton) No, I did not say that. The budget of
the Dome has always had in it a sum for legacy proceeds - initially œ15
million but it has gone up to œ30 million in the latest budget - and like
any organisation like this, in determining where its sources of money are
it includes the legacy proceeds. They have always been envisaged as being
something that will contribute to the running of the Dome.
436. Is not some of the legacy proceeds money from the taxpayer?
If so, how much of that is ----
(Lord Falconer of Thoroton) What is being sold to the bidder is
the Dome, the land upon which it stands and the land around it. It is
impossible to unbundle that, because anybody who is buying it is buying it
as a complete venture. There will have to be a division of the proceeds
within Government in that joint venture. You have got to decide which bit
should then be given to English Partnerships, which own the land, which bit
to the Dome - though it is very difficult to distinguish the two. All that
we get in the Dome company is that bit of the proceeds which are
attributable to the Dome.
437. So can we have, on behalf of taxpayers, a guarantee as to
which bit goes to English Partnerships? In government accounting, that
which belongs to English Partnerships is quite clearly taxpayers' money;
that bit which belongs to the Dome is, of course, a very grey area, where I
would say it is taxpayers' money but it is public money under a different
guise. Can we be quite clear that when it comes to the sale, as a
percentage - because we do not know how much it is going to be sold for -
how much will go to English Partnerships and, therefore, returned to the
taxpayer?
(Lord Falconer of Thoroton) You can have an absolute assurance
that the amount that will go to English Partnerships and the amount that
goes to NMEC is based upon a reasonable division between the two.
438. Can I know what "reasonable" is?
(Lord Falconer of Thoroton) It is a difficult issue to work out
precisely how you divide it until (a) you know what the deal is and (b)
what the right process is to go through to reach a conclusion on division.
439. Is it difficult to know what the right proportions are,
based on how much money you need to keep the Dome afloat? Surely, you
ought to be in a position now to tell the Committee that it will be half
and half, or it will be 60/40, or whatever it will be. Why can we not know
what it will be?
(Lord Falconer of Thoroton) It depends on which bid is accepted.
It depends upon the nature of the deal that is done and it depends upon
what process you use, in the light of the bid that has been accepted, to
determine what the sensible division is. It will be quite difficult, I
think, but it will be based upon seeking to reach a reasonable
determination of how you divide that money between the two interests -
namely, English Partnerships, on the one hand, and the Dome on the other.
How best to divide it objectively between the two of them.
440. What it is worth, based on the debts of the Dome.
(Lord Falconer of Thoroton) Not based on the debts of the Dome,
based upon an objective assessment of the division between the two.
Chairman
441. We have run well over but I did not want any Member of the
Committee to feel unable to put any questions they wanted to put to you,
Lord Falconer. We are very grateful to you for giving us your time today,
and no doubt you will come to see us when we do our next inquiry.
(Lord Falconer of Thoroton) I very much hope so. Thank you very
much indeed for having me.
MEMORANDA SUBMITTED BY THE DEPARTMENT FOR CULTURE, MEDIA AND SPORT
AND BY THE MILLENNIUM COMMISSION
EXAMINATION OF WITNESSES
THE RT HON CHRIS SMITH, a Member of the House, Secretary of State for
Culture, Media and Sport, and Chairman of the Millennium
Commission, MS CLAIRE PILLMAN, Head of Millennium Unit, Department
for Culture, Media and Sport, and MR MIKE O'CONNOR, Director,
Millennium Commission, examined.
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.
Mr Wyatt
442. 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 Gardens, Wales, 48 per cent up on budget;
to 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 Seabirds 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.
443. Thank you for that correction. I am sorry I got that wrong
before. Has there been an analysis of the 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 hoc
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 œ70 or œ80 million. Everyone
concerned - Salford 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.
444. 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.
445. 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 flow projections which have been made for each of
the major projects. We undertake a process of a business operational
review, and we check that 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.
446. Looking at the whole of the big, œ50 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 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.
447. 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
448. 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
œ1 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.
449. 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 œ5 million
this year and œ6 million next year of additional funding available to the
Tate so that they could open the Tate Modern and give free entry for
everyone. That was a departmental decision, and that commitment will
remain firmly in place.
450. 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
principal strategic 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 of 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 till now. I know that the English Tourist
Council are very keen to do so.
451. 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) 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 at one of its hearings which seemed to
indicate that everyone was working on these sorts of assumptions. 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.
452. 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
453. 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.
454. 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.
455. 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.
456. 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.
457. 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 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, at all times, tempers do
sometimes 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.
458. 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 œ38.6 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 œ38.6
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.
459. 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. So 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 œ200 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 œ38.6 million that they 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.
460. On the same day, Secretary of State, that NMEC had applied
for just under œ40 million, do you accept that the worst case might have
led to up to œ80 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 œ38 million that was being applied
for and the œ29 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.
461. 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 œ26 million, which he had brought to our attention. In terms of
making any further grant, it was incumbent 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.
462. 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 from 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 the finances of NMEC. There was a wish on the part of the
Commissions 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 Commissions 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.
463. 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.
464. 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.
465. Finally, Mr O'Connor, you go on to say that your own
preference - and this was on 17 September - 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.
466. 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 œ200 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 œ150 to œ180 million of cost. Those were considerations
which we had to take into account. 467.
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
468. Minister, in response to earlier questions, you said, I
think it was 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.
469. 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 each visitor attraction, 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.
470. 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, 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.
471. 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 Sea Birds 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 œ100 million, so that
the Millennium Awards process can continue to perpetuity.
472. 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
473. May I ask Mr O'Connor. The amount of money that has been
spent on the Dome is around œ250 million for the regeneration project of
Greenwich, which everybody thinks is a good idea, given the location. œ500
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
œ1 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 œ538 million at the moment, from a decision
which we originally took in 1996 to support the Dome, which culminated in a
grant of œ449 million in the middle of 1997 and was, I believe, the right
decision. It was right to do that. The subsequent grant of œ60 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 that
major objective. The 25,000 jobs, which have been created in Greenwich
over the next few years, the regeneration of that whole site is a human
prize which is well worthwhile. The fact that we have created in just a
few months, in a way, the second most popular visitor attraction in Europe,
is a magnificent achievement.
474. 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 we have created a whole legacy of important new
projects. If I can pick out one, the Science Centre. This country's
economic wealth is quite 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 think 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 benefitting 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, they 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 added risks but I think
the overall picture can be very good.
Chairman
475. 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
476. 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.
477. 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.
478. 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.
479. Why do you leave it to Janet Anderson to answer questions
on the Dome in that way? Some people would argue that with such a high
profile project it is really up to you to answer questions. When things
happened under the last Conservative Government it was assumed these people
did not want to be associated with failure so they left it to a junior
minister.
(Mr Smith) No, incorrect. I refer you to the point that I have just
made that there would be clear impropriety if I was both responsible for
supplying the money from the Millennium Commission and responsible for
making decisions and, therefore, being answerable for precisely how that
money is spent by the body that receives it. There has to be a distinction
between the two, as there was indeed under the previous Government where
the Chairman of the Millennium Commission was not the same person as the
person who held the share.
480. Poor Janet Anderson stands in the dock. Can we clarify who
is responsible for the distribution of funds when it comes to the sale of
the Dome because going on from the questions we have previously asked Lord
Falconer we are told the Dome may well be sold as of 1 January next year to
one of the two bidders some time this week or next week. Will you be
responsible for taking that decision and will you be responsible for the
distribution of funds when that decision is taken?
(Mr Smith) No. The decision on which of the two bidders to accept will
be taken by a ministerial team that includes Lord Falconer, the Chief
Secretary to the Treasury, Janet Anderson and the Deputy Prime Minister.
That decision will be taken by them.
481. You will not be included?
(Mr Smith) I will not be included.
482. Okay.
(Mr Smith) Indeed, although at the outset I was included in that
group, the reason why I excluded myself was that one of the bidders that
emerged, Robert Bourne, responsible for Legacy plc, has in the past given
small donations to my constituency Labour Party. As a result I felt it
would not be right for me to be part of that decision making.
483. It is not in principle because of your role on the
Millennium Commission, it is because of a conflict of interest for
receiving past monies?
(Mr Smith) Yes.
484. Nevertheless, as a Secretary of State you must have a view
on the amount of money that will be forthcoming from that, both the project
for the Dome and that that will be returned to English Partnership.
Certainly I thought it was unacceptable that Lord Falconer could not give
us a view as to how much money as a percentage - we do not know the final
figure - we will be looking for for the taxpayer who deserves to be
refunded by English Partnership?
(Mr Smith) The only percentage which has so far been set is the 7.5
per cent of the proceeds which has to go to British Gas and that is there
under contract with British Gas and always has been. Any division of the
remainder between NMEC and English Partnerships will depend on a variety of
things: the overall level of the bid that is accepted, the particular
purposes to which the bidder wishes to put the building, the contents of
the building and the land around it, the amount of land involved in the
sale, the balance that needs to be determined between the value of the land
and the value of the building. Those are all things which none of us can
tell until we know exactly which bidder has been successful and what
purpose they want to use the building for.
Mr Faber
485. I am sorry, Secretary of State, but in the latest business
plan which is at the insistence of the Millennium Commission, œ30 million
has been allocated to the Dome.
(Mr Smith) Yes.
486. If the Dome was to sell for œ75 million rather than œ100
million the only people who would suffer would be English Partnership, they
would lose their share of the money.
(Mr Smith) The figure in the business plan is a provisional sum which
is in there as a reasonable stab at what might be forthcoming from such a
division of the proceeds between English Partnership and NMEC.
487. That is not guaranteed income for the Dome?
(Mr Smith) At this stage it is not guaranteed income. That is because
none of these assumptions about the legacy are guaranteed until we know
which of the bidders has been accepted and for what purpose.
488. This new budget is no better than the last one.
(Mr Smith) No, it is a reasonable ---
489. --- a reasonable stab.
(Mr Smith) --- included as any provisional sum is included in any
ordinary contract. I am surprised that you are not familiar with that sort
of process.
Miss Kirkbride
490. Can we ask for any clarification that you are prepared to
give us as to how much money English Partnership is likely to pay the
taxpayer or actually get out of the deal when it is finally sold?
(Mr Smith) The balance of return to the Lottery players via NMEC and
the taxpayers via English Partnership is something that will need to be
determined once we are clear about who the successful bidder is, what the
purpose of their bid is and what a fair division of the proceeds would be.
That is a decision which can only be taken at that stage and I am surprised
that you should be seeking to pre-determine that decision in potentially an
unfair way at this stage.
491. We can assume it may well have to be zero or will they get
something?
(Mr Smith) I do not think we can say at this stage what the
percentages are going to be, simply because we do not know what the
successful bid is going to turn out to be.
Chairman
492. The reason I asked you, Mr O'Connor, whether you are the
accounting officer is because during my own now very distant experience of
Government I always found that accounting officers were people who set
themselves up quite rightly as, when necessary, independent of Government
and, if necessary, disassociated themselves from Ministers if Ministers
were not behaving as they ought to. I was therefore particularly impressed
by your enthusiasm in which you in that role described some of the
projects. Perhaps I can wind up this inquiry by saying this. I went to
Guggenheim, Bilbao, and I was deeply impressed with the fact that a part of
a rather boring city, which was a particular dump, had been turned into an
international mecca, that riverside was really a waste land. Without
contemplating, let alone daring to use the word dump in relation to Salford
- it is a Mancunian word -the fact that Salford has now been turned into an
international destination with an icon building I think is certainly one
outcome of which the last Government and this Government can be proud. With
that homily I will declare this inquiry closed.
