Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 40-59)



40. That is a very clever answer. Let us come back to the Commission again. The thing was doomed almost from the start. When I am at the London end I live about one and a half to two miles from the site. We could not believe it when we were told what you were trying to put on the site down at Greenwich. It is one of the most inaccessible sites. It was going to be inaccessible to motorcars other than for dropping off in small numbers and none of these mass audience attractions, when you look at them around the world, survives without having very large provision for cars. Here we had car exclusion, yet when the staff of Mr O'Connor's organisation—I do not think you were there at that time—suggested that eight million would be a more suitable suggestion—it proved to be not all that far out eventually—the Commission just blundered ahead with the wrong project on the wrong site, with the wrong transport facilities and insisted on an inflated attendance figure that would be miraculous had it been attained.
  (Mr O'Connor) On the point about transport, Mr James announced that the study would show these numbers were possible. In terms of the overall visitor numbers, the root of this number in 1996, when a study commissioned from Economic Research Associates who then commissioned MORI to carry out polls and analysis was produced for Millennium Central Limited which was the forerunner to NMEC, they produced an analysis to show a range of numbers between 10.9 million visitors and 16 million visitors. The number which was produced in the business plan in January 1997 was 10 million visitors. NMEC then brought a plan to the Commission in May for 12 million visitors. We took that plan to Deloitte & Touche and we asked whether it was possible. Deloitte & Touche did not say that 12 million was not possible: they said that it was at the upper end of what was achievable[6].

  41. The moon is possible, but it is not a likelihood.
  (Mr O'Connor) They said it was achievable. They said 12 million was achievable but eight million was the worst case. Our advice as officials tended always to be on the most prudent side. The commissioners were looking at that 12 million figure produced by NMEC and they had in their mind what had been achieved around the rest of the world. Expos] between 1962 and 1993 achieved an average of 24 million visitors. I know that is some time ago but we were also looking at Hanover at that time which was planning a five month exhibition and their target was 41 million.

  42. Was their exhibition tucked away on an isolated peninsula inaccessible by road in the middle of one of the biggest conurbations in the world?
  (Mr O'Connor) It was in Hanover but I am not quite sure about the site.

  43. I know the site. I have been to Hanover. What was left of it after the war has been rebuilt and it is still a small town; a relatively small city.
  (Mr O'Connor) I am not sure about the contention that transport was the main cause of the problem. The point I should like to make is that I do not think the Commission blundered on. The Commission supported NMEC's conclusion that 12 million was achievable.

  44. At the end of the day, can we be sure that the charity money which is being absorbed by this project, will not exceed the amount originally intended? In other words, I can only express a personal viewpoint here, if it exceeds the sum which was originally intended, I would see that as stealing the money from other charities and I would have thought that in view of the indemnity which has been given, the Government should ensure that anything over and above the original sum of money comes from taxpayers' funds, not from the charitable funds.
  (Mr Young) The position is that the Government is about to lay an order before both Houses of Parliament which will extend the lifetime of the Millennium Commission. The effect of that order, if and when it is passed, will be to delay the transfer of money from the Millennium Commission to the New Opportunities Fund (NOF). That is the position. Before Christmas both Houses of Parliament will vote on an Order. At the moment the Millennium Commission gets 20 per cent of the take of the lottery and the proposition is that that gets transferred to the New Opportunities Fund once the life of the Millennium Commission finishes. The position on the New Opportunities Fund is that it has announced and is spending its first two tranches of initiatives and it has money in the bank. What we are doing is delaying the transfer of money from the Millennium Commission to the New Opportunities Fund.

  45. You still have not answered the question. I asked whether they are going to get less than they would originally have got if the project had gone ahead as envisaged and the charity money can find the sum which was initially granted.
  (Mr Young) That would be for future governments and future parliaments to say. What we are going to do is delay the start of the New Opportunities Fund by whatever the length of the extension of the life of the Millennium Commission is. Whether charities overall get more or less, if by that you mean recipients of NOF money, will depend how long the NOF project goes on for.

  46. I congratulate you. You start with an obfuscation and you end with an obfuscation. You are consistent anyhow.
  (Mr Young) That was not my intention.

  Chairman: I would remind witnesses that accuracy is important.

Mr Rendel

  47. The Secretary of State at the end of December 1997 in his evidence to the Culture, Media and Sport Select Committee said that he saw the 12 million visitor estimate as a conservative estimate. Had this been with a capital C, it would have been factually correct of course, but I understand that it was with a small C. We have just been told by Mr O'Connor that about this time the Millennium Commission was being told that 12 million was achievable. Was the Department advising the Secretary of State at this stage that it was in fact a conservative estimate, when other people were saying it was achievable at best?
  (Mr Young) No, he was speaking then as the Chairman of the Millennium Commission. At the time, one only has to think that the aspiration was for an audience participation of around that. You will recall that when we went out for consultation on where the millennium exhibition should be, we said that no-one need apply who could not accommodate between 15 and 30 million people. That was the groundrule of the whole thing.

  48. You seem to be implying that this advice did not come from you but came from the Millennium Commission. Perhaps I could ask Mr O'Connor whether the advice to Mr Mandelson from you was that it was a conservative estimate.
  (Mr O'Connor) Clearly a large number of estimates were around at that time. In terms of what other expos were achieving and comparison with 1951 when they had 8.5 million in London in six months, some people did take the view that 12 million was conservative. Our advice was that it was at the upper end of that which was achievable[7].

  49. So the statement by Mr Mandelson to that Select Committee was not on your advice, in fact it was the opposite of your advice. You were saying it was achievable to him but he said that he thought it was conservative.
  (Mr O'Connor) His personal view may well have been that we could do even better than 12.

  50. May I ask Mr James some questions about this sponsorship money? How much of the sponsorship money has now been paid?
  (Mr James) All the sponsorship money has been paid which is contractually due to have been paid. There is a small amount which is due to be paid on contracted dates in the balance of the year.

  51. That is nearly the full £115 which you were expecting originally has already been paid.
  (Mr James) Yes, that is correct.

  52. How much of that was money in kind?
  (Mr James) Of that approximately £34 million I believe. Let me be precise. £82.7 million is cash, £34.5 million is in kind.

  53. What sort of conditions were attached to the original agreements which were made, for example when the money was to be paid over?
  (Mr James) All of them were separate. There was no standard sponsorship agreement. Every one of them was negotiated separately between lawyers for the sponsoring party and for the sponsorship team within NMEC. Some of them provided the cash in a lump sum at the beginning and some of them provided it in stage payments during the course of the year. That is why we are still receiving some.

  54. Has all the money been paid in accordance with those conditions, given that the conditions were different in each case?
  (Mr James) I believe it has; in accordance with the contracts it has. There have been one or two instances where with carefully controlled agreements, amounts which have been expected to be paid were substituted by some building on the part of the sponsor which replaced costs which we would otherwise have incurred, but that does not diminish the £82.7 million cash figure we have received.

  55. I believe the original estimate for sponsorship money was due to be £175 million and came down to £115 million which you are saying is all you really expected given the agreements which were signed. When did you know that it was only going to be £115 million?
  (Mr James) I can tell you that precisely. In January we did our consolidation of the sponsorship figures and expected at that time £122 million which included value in kind at that time. Against that figure we have received the sum of £117.2 million which is in the accounts at this time.

  56. In January you already knew there was going to be a shortfall in sponsorship of £53 million.
  (Mr James) No, of £53 million against that figure, but we also had the value in kind created at that time. The original concept was that we were going to have 14 zones sponsored. In the end we had 12 zones sponsored but additionally we received £46 million of value provided by other sponsors or out of our own financial liability which we had originally expected to pay for. We got value of £46 million of zones provided directly by two principal sponsors.

  57. Is that above the £122 million?
  (Mr James) Yes, it is. That brings us to the figure of £160 million in total which is the perceived figure which we now recognise for all sponsorship.

  58. In spite of the fact that you have some of your original costs paid for by the sponsors who built the two zones for you, the overall cost of the Dome went up quite considerably.
  (Mr James) It would have done if we had paid for those at the end. The more likely outcome would have been that at that time we would have dropped those zones out instead of building them so somebody else picked them up and built them instead.

  59. The actual final cost of the Dome is going to be more: £793 million as opposed to £758 million.
  (Mr James) If you include the value which has been provided by the sponsors who accepted the costs themselves, I believe that would be a correct assessment.

6   Note: See evidence, Appendix 4, page 40, (Pac 00-01/13). Back

7   Note: See evidence, Appendix 4, page 40, (Pac 00-01/13). Back

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