Examination of Witnesses (Questions 180-199)
WEDNESDAY 15 NOVEMBER 2000
MR ROBIN
YOUNG, MR
M O'CONNOR AND
MR D JAMES
180. I certainly do. Can you confirm, Mr James,
that at the end of these meetings the conclusion was that Mr Spence
was asked by someone, and I do not know by whom, how much contingency
there was left in the Dome? They were told £30 million and
he said "Thank you very much, we'll take that towards the
zones" and that was where the contingency went?
(Mr James) I cannot confirm that because I have been
unaware of any note to that effect and have seen none[18].
May I just make one point for you which may be helpful to the
analysis which you are drawing? It is shown in Table 8 that the
original cost—and this is very important—of the central
arena was to have been £137 million but fell to £38
million and that is because the area which it was to cover was
in fact reduced, with the result that the outer exhibition area
had to expand, which to some extent accounts for the higher expenditure
on the development of the zones to which you alluded.
181. May I ask Mr Young about a couple of things
which were said? Mr Rendel asked about the sponsorship figure.
The sponsorship has been one of the great disappointments of the
Dome. It was originally budgeted at £175 million and fell
to £150 million. Could you perhaps tell me why on 27 October
1999 in front of the Culture, Media and Sport Select Committee
Lord Falconer said that NMEC deserves great credit for its achievement
in raising over £160 million for sponsorship for the project.
Over and over the critics have said it could not be done and they
have been proved wrong. £160 million? He was counting his
chickens a little early perhaps.
(Mr Young) I thought Mr James got to a figure of £160
million in his answer to Mr Rendel.
(Mr James) One hundred and sixty million if you include
cash, value in kind and the replacement of the two zones.
182. I thought it was less than that in the
answer you gave to Mr Rendel a moment ago. I wrote it down as
£82 and £40 something.
(Mr James) One hundred and fifteen plus the £46.
183. Of value in kind.
(Mr James) Yes. May I correct that, the zone was built
by sponsors, not value in kind: £85 million plus the value
in kind, plus the zones built by the sponsors was £160 million.
184. In his opening remarks the Chairman dealt
at some length with the issue of solvency and a lot has been made
of the guarantees which were demanded by the board in May some
time. Was it 25 May? I believe you said you had received a letter
about the indemnities.
(Mr James) Yes, about the indemnities.
185. Could I refer you to Lord Falconer's evidence
to the Select Committee on 12 July this year? When that letter
requesting indemnity was received, would Lord Falconer as the
shareholder have been consulted about that? Would he have been
informed of it?
(Mr Young) I do not remember but I think it quite
likely that I would have informed him about it.
186. I asked him whether the board had asked
for or received any guarantee of indemnity. He said that when
a person takes on a job in a non-departmental public body, the
Treasury will give an indemnity to that person. I said that I
was not talking 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 phonecalls requesting a guarantee. To this he replied no.
Why do you think he said that?
(Mr Young) I may not have told him. The first answer
he gave was correct, as you heard me say to the Chairman. In our
view, which I may have got wrong, but I have been frank about
what our view was, the existing indemnity cover did apply to the
directors of NMEC. The answer Lord Falconer first gave, as I heard
it, was correct.
187. Then when I pressed him as to whether anything
had been received in writing or through a phonecall he said no.
(Mr Young) What I do not remember, and I did say that
when you first asked me, is whether I had told him of the arrival
of that letter between that time and the time he gave you that
answer.
188. I should like to take you back to Mr O'Connor's
advice given to the Department on 17 May. I apologise to Mr O'Connor
in advance that I am going to embarrass him again by referring
to his letter to the Secretary of State of 17 May. He has been
very honest and said he disapproved of the grant which was proposed.
I do not think that the language he used in the letter has yet
been expressed and I think it is important that it is on the record
as to just how strongly he felt about it. He described the latest
visitor numbers as very disappointing. He spoke of the board saying,
"Their attitude did not bode well for the future and it will
need to be confronted". He said, "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". He gives a long
description of why he feels it is poor value for money and he
ends up saying that he hopes ". . . that we will now be able
to move out of conflict and crisis". These were pretty strong
recommendations which were coming to you as the Accounting Officer
at the Department at the time from Mr O'Connor. Why did you feel
that it was in the public interest that this extra money should
be spent?
(Mr Young) To be quite precise about this, what I
think you have read out is an excerpt from Mr O'Connor's private
advice to the Millennium Commission.
189. It is to the Secretary of State in a letter
dated 17 May.
(Mr Young) As Chairman of the Millennium Commission;
that is correct. That advice was then overtaken by the Commission's
decision to go ahead with the grant. My position as superior Accounting
Officer was not to comment on the Millennium Commission's decision
vis-a"-vis their Chief Executive's advice, but to decide
whether it was proper in my view for that grant to be paid. In
answering the previous questions I explained the calculations
I went through to give that answer.
190. On costs of early closure, the costs of
early closure have continually been used as the reason why it
was better to pay an extra £90 million. I have the early
closure costs in front of me. The mid case scenarios for closure
at 20 June to close on 1 September, a decision on 20 July to close
on 1 September or a decision on 20 August to close on 1 September,
the mid case scenarios are all lower than the subsequent amount
of money which has been paid.
(Mr James) That is not correct, that is it is lower
if you have to add the two together. The closure cost would have
come on top of the actual amount which has subsequently to be
funded for continuity.
191. Is it not the case that in all of the closure
costs, in all of the estimates which have been made, the figure
for sponsorship and supply agreements, which presumably is to
defend against any possible lawsuits from sponsors, have all been
put in—I shall not give the amounts—at a fixed amount
which is a very high amount indeed?
(Mr James) You can take those figures right out of
the exercise and it is still a substantial cost penalty over and
above the actual running costs of the company which were necessary
to get to 31 December.
192. Mr Campbell asked you about costs of advisers.
Are you able to tell the Committee how much was paid to IMG for
their failed attempt to raise sponsorship for the Dome?
(Mr James) Not without taking advice from my colleagues.
If I may, I shall see whether we have a number for that? It is
£2.8 million.
193. That is quite a sizeable consultancy fee
for no work at all. Can you also tell me about the progress of
the lawsuit being conducted against the Dome by Koch Hightex.
(Mr James) That one is regarded as a case in dispute
and is one which we are resisting the payment claims on at the
moment.
194. Is it budgeted in the budget for a possible
payment?
(Mr James) We have indeed budgeted for it.
Chairman
195. You do not have to elucidate that.
(Mr James) Thank you.
Mr Davidson
196. May I start by asking you how much more
money might be required from either the lottery or the Government
to close off this whole exercise?
(Mr James) I am very confident that the sum of £47
million which was confirmed in the grant of 12 September will
be sufficient to enable the company to complete trading to the
end of the year and complete the orderly windup and solvent liquidation
of the company next year, subject to us fulfilling at that time
our known contractual liabilities as they stand.
197. That was carefully phrased. As a layman,
do I take it that there will be no more money after the £47
million?
(Mr James) I am confident that we will need no more
money to discharge our contractual liabilities which are at this
present moment to give back all the goods we do not own on 1 January
when we cease trading.
198. That is again a carefully phrased formulation.
Is there anything I should be pursuing there if I knew enough
to pursue it?
(Mr James) The question I think you probably want
to ask me is: is that going to be enough to clear the Dome, get
the Dome off everybody's hands? The answer to that is that if
there is thereafter a sale, or between now and then, of the Dome,
then that sale may specify that they want more decommissioning.
If that is so, then the cost of any further decommissioning will
be deducted against the purchase price which they pay for the
Dome. That is really the simple consequence of it.
199. What is the range of costs that that might
be?
(Mr James) We see putting the Dome into a saleable
condition as being in the order of £22 million for which
we at the moment carry a provision of £7.5 million to discharge
our contractual liabilities. We would not intend to go beyond
that unless it were specifically to respond to a sale.
18 Note by Witness: Mr Spence did not attend
the meetings referred to in Question 180 or any of the other meetings
between the Shareholder and the Chairman/Deputy Chairman. Back
| 
