Examination of Witnesses (Questions 60
- 79)
MONDAY 13 MAY 2002
MR MICHAEL
CUNNAH AND
MR DAVID
JAMES
Chairman
60. Fine, feel free to come back if you have
any other matters. Before I call Derek Wyatt I would like to pursue
one or two further matters that have emerged from Mr Doran's questions.
I find all these financial factors very difficult to understand
because they seem to be seriously contradictory to one another
and they do not seem to stack up together. If we look at the Tropus
report, on page 18 of the report we have got there in paragraph
7.1 that the original budget was established at £175 million,
and then in the second sentence of that paragraph this was subsequently
reduced to £140 million. In paragraph 7.2 it appears that
the designs in response to the £140 million budget were considered
"inappropriate" by WNSL due to the lack of back-of-house
and other facilities and the budget restriction was lifted from
all future design options from April 1999. Do I understand from
that— because if I am wrong please do not hesitate to correct
me—that after having had two budgets the decision was then
made to spend as much as it took? It says the budget restriction
was lifted. Does that mean that what happened was that the decision
was made to go ahead with certain facilities and they would cost
what they would cost?
(Mr Cunnah) Mr Chairman, this is not
wording that I would recognise although what I can do is talk
you through that period. WNSL inherited the plans that were originally
set up for the national stadium and I think the estimates at that
time, without too much detailed design, were round about £200
million. The budget that is referred to of £140 million was
the first attempt to see if that £200 million budget was
in fact a realistic budget for a national stadium. What this actually
showed was that, when the designers showed what that sort of money
would buy, it was clearly inadequate as a national stadium, hence
a fuller design for a more sophisticated stadium was then put
together. The words "budget restriction was lifted"
are inaccurate. It has always been tight budgeting in terms of
making sure that we know exactly what we will be spending and
what the business plan itself could afford.
61. If you look at 7.3 it says that a realistic
budget was never established by the WNSL senior management team
and that there is no effective budgetary control and it was potentially
a design which lacked the normal budgetary pressures and efficiencies.
I find that quite extraordinary. I find it extraordinary that
a huge project for a national stadium, or indeed anything else,
should go ahead on the basis of what the Tropus report calls "no
effective budgetary control" and in the "absence of
normal budgetary pressures and efficiencies". So what control
was there?
(Mr Cunnah) Mr Chairman, I do not accept
the allegations.
62. You do not accept the allegations of the
Tropus report?
(Mr Cunnah) I do not accept this part
of the report which says that there was no budgetary control.
All through the project there has been a lot of work that has
been done on the cost of the stadium and indeed the revenues that
such a stadium would be likely to generate. That has been very
necessary, of course, because the financial plan was always going
to be presented to the banks and to the City and in order to achieve
success in such a project of course the finances do need to hang
together.
Chairman: Okay.
Mr Doran
63. Was there a project director or is there
still a project director?
(Mr Cunnah) At the moment I am Project
Director. At that time there was both a Chief Executive and a
Director of Construction.
Chairman
64. You talked a moment ago about money forthcoming
from the banks and here I need to refer to the line of questioning
that Mr Doran embarked upon in relation to whether you could go
ahead in December and you said "yes provided the money was
in place". Mr James in his letter of 17 December in paragraph
5.4[14]
talked about the commitment of Barclays Bank to retaining their
role as the lenders and that Sir Rodney Walker believed that the
loss of Barclays would seriously discourage alternative bankers
accepting the funding role. We are in private session so there
is no point in footling around. The Secretary of State said last
week that she had given you until 21 May 2002 to confirm that
you had the money absolutely firmly committed. It is obviously
not coming from Barclays Bank because Barclays Bank have stepped
out, so what we need to know is will you have that money tied
up in the stringent terms which the Secretary of State told me
she would require by a week tomorrow?
(Mr Cunnah) Mr Chairman, the documentation
and the contracts that we have to do with the bank will take longer.
65. Could you speak up, it is my fault, not yours.
(Mr Cunnah) My apologies. The work that
we have to do to complete the banking documentation and the contracts
will take longer than 21 May.
66. So you are absolutely confident that you
will have the loan money in place by a week tomorrow? Oh, you
are no longer confident?
(Mr Cunnah) Mr Chairman, can I say that
what we do have in place is an offer of finance from the bank.
67. What does that mean?
(Mr Cunnah) That means that at the moment
we are talking about the detailed draft terms with the bank. The
finance has been approved by their board.
68. Which board, theirs or yours?
(Mr Cunnah) Both. There is a firm intention
from the bank to do the deal, but of course every deal needs to
be properly documented and all of the contracts need to be fully
in place.
69. The Secretary of State says that she is going
to make a statement to the House of Commons before the Spring
Bank Holiday recess in which she says she is going to keep us
further informed. Mr James, through no fault of his own, was quite
extraordinarily misled in being led to say in the opening paragraph
of his letter "the present, and we understand inflexible,
deadline for a decision on Wembley . . ." which was two days
before the Secretary of State's statement. The Secretary of State
replied to a Private Notice Question put down by me last week
that the 30 April deadline had been abandoned totally. What will
happen if you have not got this loan money tied up by the time
the Secretary of State is due to make a further statement to the
House of Commons within what is now only a few days?
(Mr Cunnah) Mr Chairman, the key thing
is that the commercial deal between the banks, ourselves, the
construction company and all other parties is still there and
still hangs together. That deal will be there beyond 21 May and
every party is now committed to completing the project according
to a reasonable timescale.
70. What do you mean "will be there"?
Does that mean that the loan offer from the bank will not be withdrawn?
Is that what you mean by "will be there"?
(Mr Cunnah) Correct, it will not be withdrawn
because we are working through from the offer that we have had
from them to completion of all the contracts.
71. Have either you or they got a final date
by which this deal either will be tied up or will not be tied
up? We have already passed by months the "inflexible"
deadline which Mr James was misled into believing was in place.
(Mr Cunnah) Mr Chairman, I think the
so-called inflexible deadline related to the decision whether
to proceed further with the project at that time. The deadline
that was 30 April was an estimate from WNSL of the amount of time
required in order to achieve all the different elements of the
project that were outstanding as of December and indeed the decisions
that were put in place at that time. We managed to achieve all
of those conditions by 30 April but the financing was an offer
in principle which is now being taken through to conclusion. It
will take us some time to do that.
Chairman: I have got a couple of other
questions but first I will to ask Derek Wyatt and then John Thurso.
Derek Wyatt
72. Do you mean that the heads of agreement will
be signed on 21 May? What is the Secretary of State going to say
on 21 May if there is nothing to report?
(Mr Cunnah) I am sorry, I cannot speak
for the Secretary of State.
73. Let's get to a heads of agreement report
then; have you signed that yet?
(Mr Cunnah) We are in the process of
doing that. I have come straight from an FA board meeting where
we reviewed the terms. We have approved that and we are moving
forward with those detailed negotiations at the moment.
74. What is your anticipation? That sounds as
though the contract is going to take at least six to eight more
weeks to me. Is that unreasonable?
(Mr Cunnah) We are very intent on doing
this the right way and making sure everything is done properly.
Your timescale is a reasonable estimate. It is a matter of weeks
but we just need to make sure that we do everything that we need
to do.
Chairman: Incidentally, you may have
talked about the WNSL deadline but the deadline of 30 April as
far as we are concerned was the deadline to which the Secretary
of State committed herself in an answer in the House of Commons
on 10 April, a deadline which either she or you or both of you
failed to meet. John?
John Thurso
75. You have partly answered my question because
we had the same question in mind. Just so I can get this straight,
you have had an offer of finance which would have been subject
to your board approval and on the other side the approval of the
credit committee and their board and the approval will have had
a number of conditions attached to it. It has been approved by
your board and it has been approved by their credit committee
and their board so you are working through the conditions. Can
you say what those conditions are? Presumably there is due diligence
involved?
(Mr Cunnah) The due diligence has already
largely been completed. If you would permit me, Mr Chairman, I
do not think I should say what the conditions are because I think
it is commercially sensitive.
76. I am not asking you to give me the commercial
terms in that sense. I am asking you to say what conditions presently
have to be delivered before the bank will say this is an absolute
offer?
(Mr Cunnah) Very simply that all of the
required contracts are in place.
77. So once all of the required contracts are
in place and the bank says that, you have got your money?
(Mr Cunnah) Yes.
78. Which contracts are not in place?
(Mr Cunnah) The phrase "in place"
means essentially needing to be reviewed and approved by the bank
and their lawyers so all of the staging terms of the Football
Association, the Football League, the Rugby Football League, for
example, are all in place but need to be reviewed. There are many—
79. Can I pick you up on that. When you say "in
place", do you mean agreed between the parties and open for
review by the bank?
(Mr Cunnah) Correct.
14 See HC 843 (2001-02), Memorandum, which
contains the report of the independent review undertaken by Mr
David N James CBE and Berwin Leighton Paisner into the Wembley
national stadium project (procurement process), together with
a covering letter, dated 17 December 2001, from Mr James to Sir
Rodney Walker, then Chairman of Wembley National Stadium Limited.
The material was submitted to the Committee by WNSL and contains
deletions discussed and agreed between WNSL and the Committee. Back
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