Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 140-159)



  140. I have a little experience of the private sector and one of the things the private sector does is make sure that its finance function is up to the job. If the finance function here had been up to the job, in other words if it had been strengthened—this is no criticism of any individual member of staff involved—do you think that what has happened, the way that the Dome has progressed, would have been the same or do you think we would have had a much better outcome than we are likely to have?
  (Mr James) Actually I do not, because I think that although it has made for a far greater complex to sort out, we must understand that the overrun here is £35 million of overrun on cost, most of which is related to the close-out cost after January of next year. The real problem here is a revenue shortfall from sponsorship plus sales of tickets. Therefore we have not lost money as a result of inefficiency. We have had a bigger muddle sorting it out but not lost it.

Mr Campbell

  141. I should like to ask you about visitor numbers because it seems to me that it is central to what has happened at the Dome. While I hope that your staff have recovered from the trauma of the recent attempted robbery, I do hope one of them showed some initiative and counted the armed police officers as visitors, because every little will obviously help. Visitor numbers are crucial on a project like this, are they not? The number of visitors you expect or hope to come through the door helps to determine not only the budget of the project but also the size of the building, the number of staff employed, the number of pies you have to order, all of those things.
  (Mr James) Absolutely correct.

  142. Why is it then that the projected visitor numbers showed such wild fluctuations? The report says that in 1995 the Millennium Commission were talking about 15 to 30 million; by February 1996 that had been downgraded to between 11 and 16 million; by the end of that year it was back up again to 13.5 million. This is all against a background of Alton Towers, our most successful pay-to-see attraction attracting less than one quarter of the final agreed figure.
  (Mr James) Yes and this was a figure which is even now slightly edging up against the estimates on which we built the figures into the budget for £47 million to the grant application in September, because we anticipated at that time that we would have 4.5 million paid customers by the end of the year and we reached that figure last week with nearly seven weeks to go. Even we got it wrong; we underestimated it slightly. It is a bouncing ball. You are quite right, it has gone down. I drew attention to the chart earlier on which shows that they were on track with their forecast up to April for 10 million. I have also drawn attention to the fact that the real figure built into the budget was just a little under 11 million and not the 12 million which has been the publicly expressed figure. I think you put your finger on it very well: there was a lack of any comparators which were reliable on which to base the figure. It was always going to be a bit of a guess and unfortunately it was wrong[16].
  (Mr O'Connor) May I answer for the Commission figure of 15 to 30 million? That 15 to 30 million figure was an aspirational figure for the capacity of the site. There was no concept of Greenwich, there was no concept of the Dome when that figure was around. It was for an exhibition. It could have been a non-charging exhibition. The 15 to 30 million does not have any relevance to the Dome itself. The first real figure which you can talk about in relation to a proper estimate of what this Dome could accommodate and at certain ticket prices, was the ERA/MORI research in November 1996 which gave the range of 10.9 to 16 million. The Dome with a breakeven point at 11 million was proposing the figure at the bottom of that range coming out of that research.

  143. Nevertheless, that figure will not be reached by the end of the year. There is a huge gap, yet the project went ahead based on those figures rather than something which would have been closer to reality. Mr Love was almost alluding to some kind of conspiracy theory: to me this is more of a cockup theory of what happened because people made assumptions, went ahead on those assumptions and unfortunately were having to pay a price. You have corrected me: I was going to say 12 million which was in the business plan in May 1997, but you said it was nearer 11 million.
  (Mr O'Connor) Eleven million at breakeven.

  144. That is exactly the point I am making. If you are talking about a figure of 12 million and yet you need 11 million to balance the budget, there is not much room for error, is there?
  (Mr O'Connor) Yes, it was a high risk business plan.

  145. That is exactly what the report says: it was an extremely high risk business plan. May I suggest briefly in passing that one million free child places, which is excellent news for children and in that sense I accept it and applaud it, are bad news for the budget, are they not?
  (Mr O'Connor) I believe that NMEC's acceptance of that one million free schoolchildren was based on the fact that it did not knock a hole in their budget, they just reduced their contingency on their revenue.
  (Mr James) That is correct.

  146. Let me go on to where the advice might have been coming from for some of these figures. You were asked about consultants earlier and whether or not the public were consulted about whether or not they would attend. When did that process begin, in other words the projections which were now being accepted and the figure arrived at of 11-12 million? How much was that actually based on information which had been gathered from the public?
  (Mr O'Connor) That was based upon the MORI research, part of the ERA work in November 1996.

  147. I cannot recall anyone coming to my Tynemouth constituency and asking people whether they would be prepared to pay. Then we did not know how much the tickets were going to be and the trains were running and if you start to add the prices together there is some deterrent built into that. How much of that research asked the question: would you be prepared to come to the Dome if you could not bring your car?
  (Mr O'Connor) I can answer that in writing. I am not so familiar with the research that I can answer that specific question. It is comprehensive research based upon sampling. The question of travelling time was covered and weightings were applied to that, but I am not sure that the planning restriction on cars was extant at the time.

  148. It was a major decision to be reached, was it not? When we visited the Dome we were all told of how many people the transport system was going to deal with and the assumption was that people would certainly not be encouraged, or not able to come in their motorcars.
  (Mr O'Connor) And that is an assumption they have now changed and you can and there is carparking at the Dome. It was based upon the fact that the transport system could cope with those numbers. The analysis from the traffic consultants was that the Tube and the road network and the boat access—remember the Millennium Commission built piers along the Thames to help the river transport—could cope with those numbers.

  149. How much to date have consultants been paid in total for the advice they gave on the project? I read in the report that up until January 1997 it was £12.6 million. How much is it to date?
  (Mr O'Connor) That is the money which the Commission paid for the research and essentially the development of the concept and design of the building up until 1997 when we made a grant to NMEC and from then they paid so I cannot answer for anything from the grant budget but we certainly paid that amount of money in developing the concept, in the research and design of the basic structure.

  150. Mr James, do you have any idea of what the figure is since January 1997 for consultants?
  (Mr James) I have a schedule of the costs which were paid for advice during that time. I am uncertain whether these are all for accounting advice and assessments of numbers.

  151. A ballpark figure.
  (Mr James) It looks from the schedule we have here that around February 1997 we paid Deloitte & Touche something in the region of £25,000. We paid Arthur Andersen some £25,000 in February of that year.


  152. Perhaps you could provide us with a copy of that schedule.
  (Mr James) Yes, I can provide you with one. I have just received a number for you. The market research in total going into this exercise amounted to an estimated £800,000.

Mr Campbell

  153. I am thinking of consultants' fees as well as market research.
  (Mr James) That is including the consultants attached to the exercise in fixing the numbers.


  154. We should still like to see the schedule.
  (Mr James) Yes; we shall provide one.

Mr Campbell

  155. I want to move on now from visitor numbers to some other decisions which were quite crucial it seems to me. What was GEN36?
  (Mr Young) That was a Cabinet Committee under the previous Government.

  156. What was the purpose of that or the remit?
  (Mr Young) It was to coordinate the Government side of the millennium planning activities.

  157. It was planning, it was financing, it was coordination of the project.
  (Mr Young) Yes. Let me give you the announced remit which I now have, "To oversee the Government's role in relation to the millennium festival and to take forward any necessary planning of the Government's involvement in this event".

  158. A crucial decision, was it not, in January 1997? The Government decided that the project would be delivered in the public sector. The report says that the project which was to be delivered was inherently risky, carried a significant degree of financial exposure, made worse by the complex organisational arrangements put in place from the outset. Decision was taken that this would be delivered in the public sector. I have to say I smiled when I read page 13, because it said that Millennium Central Limited was taken into "public ownership". I cannot remember public ownership ever being central to the previous Government's programme, but the private sector would not carry the risk, would they?
  (Mr Young) No.

  159. So it was to be delivered by the public sector. If things went wrong, where would the company go for the money? On page 23 for example, it says that they could not go to the market because they could not afford to borrow the money commercially; it would be too expensive in the marketplace. What other avenues were there for money? If the assumptions which had been built in for the whole project had proven to be mistaken, where else could they go to be bailed out?
  (Mr Young) The best thing I can do is quote from a parliamentary announcement on 20 January 1997 by the then Chairman of the Millennium Commission who was Mrs Bottomley. She makes the first commitment which is then repeated by Ministers in the current Government that ". . . the Government has taken the view that the Commission should have provision to cover variations from the estimates in the plan without prejudicing its existing grant programmes". Just to translate that, because I have taken it out of context, it means that the previous Government in January 1997, which was then repeated by this Government as soon as they came in, made a commitment that they would lengthen the Millennium Commission's funding life for as long as necessary to make sure that the Commission's payments to the exhibition did not jeopardise the Commission's other grant programmes.

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

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 12 September 2001