Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 80 - 99)



Mr Steinberg

  80. You gave us some very confusing answers and I should just like to get the facts on record because I am not certain you have made this clear. When you were originally asked by the Chairman whether or not the figures which had been given to you depended upon the pricing, you said no. Then said that MORI had told you that if the price had been £7 the figures would have been lower. Then you seemed to change your mind and then you changed your mind again. What is the situation? Did MORI tell you that if the pricing was higher than the £5 that visitor figures would reduce?

  (Mr Wilson) Yes, they did.

  81. They did.

  (Mr Wilson) Yes. That was what I was trying to say both times and I apologise if it was not clear.

  82. So we have got that clear. In effect, you actually ignored the advice from MORI.

  (Mr Wilson) Yes; in that sense.

  83. You were doomed to failure then, were you not? What is the point of employing a consultant who clearly tells you that if you overcharge, the figures will be reduced when you openly admit now that you ignored the advice. It just seems totally bad management.

  (Mr Wilson) I understand the point. May I try to explain? We had that research produced and the other research I was talking about and that formed one of the bases of Schroders placement documents to the private sector. We then handed over that responsibility for taking account of that to the private sector. They then had to put together their business plans and try to make it work. Mr O'Boyle has already said that he subsequently asked for a considerable amount of other advice from consultants which was not exactly the same advice as MORI had given us. He then had to make the choice about which one he was going to believe and go for.

  84. This is just rubbish, frankly. Here you were, employing MORI to give you advice. When they actually gave you the advice you ignored it. You now try to pass the blame onto RAI and say it was their responsibility because they were running it. Mr O'Boyle made a statement that even though the numbers were still declining, considerably declining, and we can see from the chart that they went from 360,000 down to nearly 200,000, you said—again I might be wrong—that you were still prepared to take the advice of the consultants before the project had even opened. Even though, here it was, jumping up in your face, smacking you in the mouth that the number of visitors was declining because the cost was too high, yet you went on your own merry way.

  (Mr O'Boyle) The exit surveys showed us explicitly that three quarters of the visitors said it was excellent value for money.

  85. After they had come out.

  (Mr O'Boyle) After they had come out. We also commissioned an MEW survey after opening, which was independent of the environment and still that showed a positive value for money test. What we also found quite clearly was an innovative way of pricing. We offered a £4.95 winter price off peak in 1998. We had a peak price for peak periods and we had an offpeak price of £4.95. The headline price was £7.95, a whole range of discounts was in place and we had a £4.95 price for the winter. It did not change the numbers.

  86. No, because the price has not even come down, it is the same at £4.95; you are saying to visitors that it will cost them £5.

  (Mr O'Boyle) It was £4.95 in 1998. We took it down to £4.95 in the winter.

  87. What the prices were in 1998 is irrelevant. The fact of the matter was that you were not getting any visitors in, yet you still did not decrease the prices. What would you have to charge to break even?

  (Mr O'Boyle) I will answer that by saying we had to get to 345,000 visitors. We drove the break-even point down to 345,000.

  88. At what cost?

  (Mr O'Boyle) Assuming the same per capita spend.

  89. So basically you had to get 350,000 people there.

  (Mr O'Boyle) Yes.

  90. Even when it was going down to 200,000 you still did nothing about it. I shall tell you why you did nothing about it: because the taxpayer was going to come in and bail you out, that is why.

  (Mr O'Boyle) We did not actually.

  91. You had a very good idea.

  (Mr O'Boyle) We did not.

  92. It was a bit like First World War generals, was it not, sending the troops over the top and it did not really matter because at the end of the day the taxpayer would come and bail you out. We are told in the report at paragraph 1.48, that there were disagreements between RAI and the Royal Armouries over RAI's attempts to boost income. What were the disagreements?

  (Mr Wilson) They are laid out in paragraph 1.48.

  93. You tell me.

  (Mr Wilson) The sort of areas where we were having disagreements were ticket pricing, which we have dealt with quite a lot in this hearing, the approach to marketing has been mentioned as well. It was those sorts of issues, the issues we have been talking about, the issues which were of fundamental importance to the future of the museum, and we all knew it, were where we sometimes had differing views. That does not surprise me. We had differing views within an organisation about those sorts of important issues when times are tough. We did have some differences of view. We were concerned all the way through with the pricing policy which had been introduced. We knew why it had been introduced but we were concerned about it and Mr O'Boyle knew that. We were concerned about some aspects of the marketing and concerned about the exhibition programme and we discussed those things. Ultimately it was Mr O'Boyle's responsibility to his shareholders to do the best he could. We discussed them and we agreed when we could.

  94. Responsibility to his shareholders; not to the taxpayer, to the shareholders.

  (Mr Wilson) Mr O'Boyle's responsibility was to his shareholders, yes. My responsibility is to the taxpayer.

  95. We have all received a letter and sometimes if you have letters sent to you you think it is perhaps some disgruntled person and you get disgruntled people all the time. Frankly after some of the answers which have been given this afternoon when you read this letter you begin to wonder whether or not in fact perhaps some of the accusations which have been made are pretty accurate. For example, the letter says that the Armouries' future has been jeopardised due to mismanagement, especially when those concerned have been warned right from the very start that their plans were unlikely to work, their attitudes were patronising and their ideas uninspiring and unexciting. There is somebody who has written and complained. I must admit, listening to some of the responses I have had this afternoon, I tend to wonder whether this person has not got a point. Here we are, MORI was telling you that your numbers would reduce if you did not decrease your price. You took no notice of that. Apparently the support group was telling you exactly the same things and you were just ignoring everybody's advice. That does not give us a lot of confidence to accept some of the things you are telling us this afternoon, does it?

  (Mr Wilson) I can understand that. I can, however, assure you that the support group made no such comment, there were two people in the support group from whom you may have had letters, certainly from one of the two people, who took that view. It was not the view of the support group as a whole[5].

  96. But they were right, were they not?

  (Mr O'Boyle) May I pick up on the visitor experience? It is important to look at the round. In 1996 we were Group Attraction of the Year, a national award. In 1997 we were Visitor Attraction of the Year for Yorkshire. In 1997 we were Museum of the Year, highly commended. In 1998 National Museum of the Year, Good Guide to Britain. In 1998 we received the top Outstanding Award from the United States for Themed Entertainment. Ninety-five per cent of our visitors said they had a wonderful day out. We are talking about something which is a very, very innovative attraction.

  97. When we asked the same questions of Mr Young regarding the Dome, we got virtually the same answer that 95 per cent of the people who came out of the Dome said they had had a very good day. The fact of the matter was that not enough people were going in to have a good day. That was the problem. You should have been asking people before they went in what the pricing policy should be, not after they had come out and spent their fivers. They are hardly going to say that they were mugs to pay the £5 to go in in the first place. May I turn to the Treasury because they also have a lot to answer for, do they not? This puts the whole of PFI in jeopardy, does it not, really?

  (Mr Glicksman) No, I do not think so.

  98. Let me explain why I think that. I have a £90 million hospital being built under PFI. What happens if it goes bust? What is going to happen? Will it close?

  (Mr Glicksman) I do not know the terms of the deal in that particular case. It is the current guidance that risks which have to be retained in the public sector should be retained in the public sector. If there is a risk that the hospital would collapse, that the hospital would have to close, that is a risk which the public sector cannot afford to happen, then it must keep that in the public sector.

  99. Exactly. So the taxpayer will come in and bail it out as they have done here. Who loses out? The taxpayer every time. You have not lost out, have you?

  (Mr O'Boyle) Shareholders have lost their money.

5   Note: See Evidence, Appendix 1, page 21 (PAC 2000-2001/153). Back

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