Examination of witnesses (Questions 680
TUESDAY 6 FEBRUARY 2001
SMITH and MR
680. At that meeting with Mr Bates, in return
for the £20 million, did you agree that Wembley would enjoy
relaxation of the marketing rights at the ground, in particular
with relation to naming rights in and around sponsorship, naming
rights in around the ground?
(Mr Chris Smith) No.
681. You did not subsequently confirm that decision
in a letter to the Chairman of the FA or to the Chairman of WNSL?
(Mr Chris Smith) No, what I confirmed in writing to
all the parties concerned was the agreement for the return of
682. Are you concerned that it now looks as
though opinion has hardened on the board of WNSL and there is
a very good chance that they will not be paid the £20 million?
(Mr Chris Smith) The latest information that I have
from the Chairman of WNSL is that they stand by the commitment
to return the £20 million that they made.
683. Has anything been paid yet?
(Mr Chris Smith) No, because certainly it was not
envisaged in the agreement that it would be yet paid.
684. I thought £3 million was supposed
to have been repaid in 2000?
(Mr Chris Smith) I would need to check the agreement
but it was as the money began to come in to WNSL and the Football
Association from the onward sale of some of the corporate facilities
at the ground.
685. It does not look very likely at the moment,
(Mr Chris Smith) That was the basis on which the agreement
686. If you would just indulge me for a moment,
Chairman. That is the first tranche, the £20 million. The
second tranche is the £40 million which is the return the
Lottery is supposed to supply, and we will not rehearse the arguments
about the athletics, and the warm-up track. Where is the further
£35 million conservative estimate going to come from?
(Mr Chris Smith) It is a matter entirely for debate
at the moment as to whether the £90 to 95 million approximate
figure is an accurate figure. We will know a lot more as soon
as the feasibility work that is currently under way is done.
687. Have you ever known of a major feasibility
study where costs do not subsequently go up afterwards?
(Mr Chris Smith) I am aware of quite a number of stadia
that have been constructed around the country in the course of
the last five years which have seat for seat been considerably
cheaper than the £90 to 95 million which is currently on
paper. However, in addition to the £60 million which has
been in principle committed by Sport England, there are further
sums which have been committed by both the Lee Valley Authority
themselves and by the UK Sports Institute for the ongoing centre
of excellence work at the ground. There is a lot of work currently
under way by the Borough of Enfield, together with companies in
the private sector, to seek private sector support. I gather that
those discussions are very encouraging. Everyone involved in both
the borough and the Lee Valley Authority is confident that the
funds needed to build the stadium will be found.
688. If Sport England and the Sport England
Board was to turn around at the end of all this and say it does
not offer value for money, it is not the right place, it is not
the right site, there is not a long term structure in place to
finance the stadium, and they refuse to pay the grant to the Board,
what would you do then?
(Mr Chris Smith) Obviously they would have a right
to take that decision because they are an independent body. However,
I would certainly very much hope that they would not seek to do
689. You are basically putting as much pressure
on them as you possibly can?
(Mr Chris Smith) I have urged them publicly and privately
that I hope they will take into account both the value of the
2005 championships for the nation and also the importance of the
legacy for athletics but those are decisions which ultimately
are for them to take.
690. Even though you had consistently over the
past year been giving everyone the impression that it was a done
(Mr Chris Smith) I rely on the in principle support
that they have given. That is valuable support and they have indicated
to me on quite a number of occasions that they hope to be able
to stand by that.
691. Finally, Chairman, you said also in Sunday
Business a couple of days ago "Obviously there is a General
Election between now and then and that might change my position
a bit". What did you mean by that?
(Mr Chris Smith) Well, the fairly obvious point that
has to be made is that the outcome of a General Election is not
a foregone conclusion, Chairman. I would not wish anyone to think
that it was.
Chairman: That is the first time I have
disagreed with you, Secretary of State.
692. Secretary of State, my apologies for being
late and I hope you have not already dealt with this issue. The
process by which the Lottery operator was selected for a second
term was ultimately a bit of a shambles with the delay and with
the problems of announcements and court action and all of that.
It certainly would not have been what, I am sure, either of us
would have wanted to see. Given that, you made comments at different
points during that process and yet did not make comments at other
points of the process. What do you consider to be your role in
now reviewing that process?
(Mr Chris Smith) Well, I have already touched on some
of this in answers to previous questions, but certainly the process
that was gone through was not the smoothest of operations. I think
there are obviously some lessons to be learned from this. I do
think that it is sensible to review the process to see whether
changes are required. That review is one that I would not wish
to rush in to because I think we need to make absolutely sure
that the new franchise is absolutely signed and sealed and everyone
knows exactly what is going to happen when. Once that is all known,
then I think that will be the time to establish a review to look
in detail at what happened, why things went wrong where they did
and also to talk with everyone who was involved in the process,
both the regulators and the bidding organisations, to see what
recommendations they have as well. I am sure the deliberations
of this Committee will also form a major part of any such consideration.
693. Do you accept that in making comments in
support of the Commission on their first decision, and not making
comments after the second decision, may have been unhelpful?
(Mr Chris Smith) No, the comment that I made the first
time around was in relation to the decision which the Commission
took that they were unable to award the franchise to either of
the two operators. In the case of Camelot because they were worried
about the propriety issues in relation to GTech. In the case of
The People's Lottery application, because they were worried about
the protection of players and the financing of the bid. Now in
those circumstances they had taken the decision to say publicly
that they were unable to appoint either of the two operators.
At that stage I did say that I welcomed the robust way in which
they had examined both of those two applications. That I think
was an entirely legitimate thing to say. What we now know, of
course, is that the concomitant decision that they took, which
was to commence detailed negotiations with only one of the two
bidders, was not a sensible and right decision. The Court made
its judgment on that. It was not up to me to make a comment on
any decision that the court had made because I would not seek
to question the judicial process.
694. Do you think you should now review the
membership of the Commission?
(Mr Chris Smith) The membership of the Commission
I think proved themselves during the course of the consideration
that they gave in November and December as to the two bids that
were in front of them. They reached a decision, which has now
been accepted by all parties involved. They clearly have strong
leadership in the form of Lord Burns. It may well be that members
of the Commission themselves will decide that they have had a
good stint and want to stand down in due course, that is a matter
entirely up to them.
695. In the future, if with a new operator there
might be issues of public concern, perhaps the sort of problems
we have faced in the past, would you consider it to be your role
as Secretary of State to make public comment and to intervene
or do you now think this is purely a matter for the Commission
and the chair of the Commission?
(Mr Chris Smith) On the whole, of course, it will
be very much up to the Commission to make decisions and to monitor
exactly how the operator is going about putting the new franchise
in place than operating it. If at any stage there is a question
about the actions of the Commission then of course it would be
a matter for me to consider because ultimately the Commission
are answerable to me for the propriety with which they go about
doing their job. At present I see no reason to intervene in that
696. In relation to what I understand to be
an application by The People's Lottery for some form of compensation
for their bid, do you have a comment on that?
(Mr Chris Smith) That is entirely a matter for the
Commission to make a decision on.
697. You will certainly not be providing any
additional funding to the Commission to be able to deal with that
(Mr Chris Smith) No, that is a matter entirely for
698. But the Commission clearly will have a
decision to make and as you just said the Commission are responsible
to you ultimately. Surely you would be willing to comment at some
(Mr Chris Smith) I have every confidence in the ability
of the Commission to come to a sage judgment on that matter.
699. On these questions of regulation, has it
not emerged, Secretary of State, that every formal regulation,
however well intentioned, is seriously vulnerable? The previous
Government when it set up the Lottery created Oflot and appointed
Mr Davis. They did that from the best of intentions, they did
not want themselves to be involved in any major decisions about
the Lottery once legislation had been passed. That was found to
be seriously vulnerable. This Government then changed it by creating
the Lottery Commission. It has emerged from questioning this afternoon,
that turned out to be seriously vulnerable, without any reflection
whatsoever on the integrity of anybody on the Commission. The
Commission clearly made a very bad mess of that, which resulted
in the litigation which resulted in the resignation of one of
the revolving Chairman/woman and the arrival of Lord Burns who
did a very, very good job as professional trouble shooter but
made it reasonably clear to this Committee that he intends to
move on after a decent interval. He will do a year and then go.
If one looks at other forms of regulation, the ITC made an appalling
mess of the whole News at Ten issue which has resulted
in not only a mess on the news on television on Channel 3 but
also a mess on the news on television on Channel 1. That is the
result of regulation. If one looks at the British Museum and the
admitted mess over the South Portico and Portland Stone versus
French stone, that was done with the best of intentions by the
trustees of the British Museum, another form of regulation. If
one does not have to, and I would not in any case, cast any reflection
whatever on the integrity of any people involved in all these
decisions, they have been seriously flawed decisions which in
some cases have been adverse to the interests of the taxpayer.
Clearly this is a very, very difficult problem because governments
of both political parties have found themselves assailed with
difficulties as a result. Is it your belief that we need to assess
this whole business of regulation because if you get an effective
regulator, as clearly in the case of Lord Burns you got in the
end, things work well, but if you do not get effective regulators,
as appears to be the case in all of the other examples I have
quoted, then you can be in a lot of trouble and, although the
regulators have the job, the Government of the day of whatever
party is in power in the end carries the can.
(Mr Chris Smith) You touch, Chairman, as you say,
on a very difficult issue about what the best format of regulation
is likely to be. You are always going to have areas of public
life, areas of public service, where you require regulation of
some shape or form, so the issue is how best to deliver that regulation.
The two models that have tended to be in place up to now, either
the single person regulator or the board of non-executive lay
people regulator, have both in some cases delivered effective
regulation, in some cases have not delivered effective regulation.
I think we need to give some careful thought particularly in relation
to another inquiry that you are conducting at the moment in relation
to the precise structure of OFCOM into how to get that structure
right. In relation to the National Lottery Commission I would
say, however, that they made one very major mistake, they made
it in good faith,
700. Is that not the worst kind of mistake?
A mistake made in ill faith for personal gain at least has got
that motivation but decent people who are not up to their job,
that is a very different matter.
(Mr Chris Smith) Far be it for me to suggest to any
regulator that they should make decisions in ill faith. They made
one serious mistake which, of course, the court then subsequently
rectified. I think it would be foolish for us to assume from that
that the entire nature of such a regulatory body is bound to be
disastrous. I think we need to look very coolly and carefully
at what works and where and why and whether it is very specifically
a case of getting the right people rather than the right structure,
or whether structures being got right can help you to get the
whole nature of regulation right as well.
701. Would they not be assisted, whatever form
you get, if we in this country were to adopt the practices they
have in the United States of transparency? We have an extraordinary
culture of secrecy in this country in which a very great number
of major decisions, in which people are interested, are taken
behind closed doors. When this Select Committee a couple of months
ago visited the United States to meet a number of lotteries, we
were told, for example, by the Lottery Commission in Maryland,
who run a very successful lottery, that all the meetings of the
Lottery Commission there are held in public, on the record, with
members of the public able to attend and the press there. Why
can we not encourage, or indeed require, except when matters of
serious commercial confidentiality are being discussed, these
regulatory bodies, whether it is the Lottery Commission, whether
it is the ITC, whether it isGod help usthe BBC Board
of Governors, to meet in public? After all, the public finances
all of this. The Government that has introduced the Freedom of
Information Act, should it not now in these reviews you are talking
about bring in a culture of transparency so that people can actually
see for themselves the decisions being made in their names?
(Mr Chris Smith) The first thing to say, Chairman,
is from my recollection of the Freedom of Information Act, I think
quite a number of these bodies do themselves fall under the Freedom
of Information Act and, therefore, there is access to certain
numbers of documents. Secondly, there are a number of regulatory
bodies that have already, with my encouragement, taken steps towards
greater openness. A very good example is the Radio Authority which
is now much more open about the decisions it takes, the discussion
leading up to those decisions, the publication of minutes and
such like, than they were in the past. There are clearly some
issues, particularly where regulation is occurring in a very sensitive
commercial market, where issues of commercial confidentiality
will inevitably mean that there has to be some private discussion.
The progress that could be made towards greater openness is certainly
something that I would welcome.
702. We have held discussions, and for example
Mr Wyatt referred to the competing merits of GTech and AWI, with
GTech and AWI, we have held discussions with the Lottery people,
all of whom made no requirement whatever of confidentiality about
the competing merits of these two. We came down pretty well on
the side of GTech even though AWI gave a dazzlingly brilliant
presentation compared with the one by GTech. I simply do not understand
why the behind the net curtains, not in front of the children
ethos prevails in this country. Mr Faber has been talking about
the proceedings of the Lottery Commission and, apart from any
matters of commercial confidentiality, I cannot see why the discussions
of the Lottery Commission should not have taken place in public
and why they should not have been televised; in another country
they would have been.
(Mr Chris Smith) Of course, the Maryland example might
not be an absolute analogy because of the fact that the lottery
was not itself being run eventually by a private company.
703. A-ha, but I made that point to you already.
(Mr Chris Smith) In relation to the discussions of
the Lottery Commission I would certainly hope that as much as
possible that was not necessary to be kept confidential as a result
of commercial reasons could be made available and open to the
public. Indeed, it is also worth bearing in mind that the Commission
is required by law to publish a full statement of reasons for
any decision that it makes and it has to set out the thinking
that led it to make the conclusions that it did. So there is some
element of openness there at the moment. I would certainly encourage
them to go further than that.
704. Secretary of State, I could go on forever,
not just about this, but the whole question of additionality,
about the distributing bodies which Mr Faber talked about, but
we have kept you here a very long time and it is time we finished
and had a cup of tea. I thank you and Mr Zeff very much indeed
for coming here this afternoon. We shall be seeing you again quite
(Mr Chris Smith) Thank you.