Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 160 - 167)

MONDAY 13 MAY 2002


160.  One final point to Mr James. You answered my previous question about what you would recommend, belatedly, and you raised the issue of a guarantee by the FA and obviously that is quite an attractive option. I do not know whether you can answer this or whether Mr Cunnah can, but presumably the bank will not want to be too exposed, so is that part of the negotiations? Is the bank looking for a guarantee from the FA?

  (Mr Cunnah) You are right that, with each of the banks we have talked to and negotiated with, support from the FA is always one of the aspects they look very closely at. Each time, particularly in the current negotiations, I think the bank are happy with the support the FA has to offer.

161.  Can you be a bit more explicit about what you mean by "support"? Do you mean there will be a guarantee from the FA?

  (Mr Cunnah) The FA is able to commit £100 million of equity that has always been on the table.

162.  That will be the limit of its guarantee?

  (Mr Cunnah) It then provides certain on-going financial support once the stadium is open, in addition to the £48 million of non-construction project costs I spoke of before.

163.  So £100 million of equity, £48 million, but no guarantee. Is that what you are saying?

  (Mr Cunnah) There is a limit to the guarantees that the FA does give and indeed can give.

164.  I am not sure you are saying they are giving a guarantee or not.

  (Mr Cunnah) The FA is giving guarantees, but they cannot be unlimited.

John Thurso

165.  Gentlemen, as our Chairman often reminds us, the only reason we are involved is because of the public money and the involvement of DCMS. I actually think there are three separate issues involved in this, two of which concern others rather than us. One of them is the way in which sports businesses tend to behave, and as we are private and privileged I have a very low opinion of the PGA European Tour whom I had to do business with once, and if some of the businesses involved are anything like that I can imagine some of the problems there might have been there, and possibly that might have been what you were alluding to when you said where your torch could not quite shine. But that is not our concern. The second issue is the one of corporate governance which links into the third issue, which is our main concern, which is the DCMS and how it has behaved and how the public money side of it comes in. Can I pick up very quickly on that corporate governance side so I am clear I understand what you and the Berwin Leighton Paisner Report says. Can I say that I do understand the language because until a few weeks ago I was chairman of a fully quoted Plc. You make the distinction between what a limited company has to do by law as opposed to what a Plc might do with regard to corporate governance through the model code. I understand what you are saying in the report to be very severely critical of the way in which corporate governance was done. I do not think it would be possible to be more critical of it. I think you are recommending really something much closer to Plc guidelines and disciplines, particularly with the independence of the finance function and looking perhaps at committee structures and things like that, and although that is not in your report, it is the implication from it. Can I ask you to confirm I have got that broadly right?

  (Mr James) You have very accurately understood, sir. I was going to ask the Chairman at the end if I might add a point on this very subject, because I believe the issue of governance is so fundamental to everything we are talking of here that I do not wish to leave anybody in any two thoughts as to where I stand on this. We have already commented that I have been able to watch the inside of a bankrupt body[22] from the point of view of the NMEC over the past two years, and through that time I was the Accounting Officer for that. I therefore am aware of the responsibilities of the accounting officer for anything where government money is spent, but here we have WNSL where there is no such person in the structure as an accounting officer and look what has happened. Had there been an accounting officer, that man in these circumstances would have been held to be heavily accountable to yourselves or to the PAC or the National Audit Office and would have been in some serious bother. One of the features going forward—and I think Mr Cunnah and his colleagues have made, as I understand it, very great progress and are much to be congratulated, indeed I think there is more, from what I hear from Mr Cunnah, than you have heard him today—concerns the structure of sub-committees which have been set up and created in order to deal with a number of the issues of governance here, but one thing I have not heard of anywhere in the WNSL structure is whether they are going to have a compliance officer and what the terms of reference for a compliance officer should be. Now a compliance officer may be the poor man's accounting officer but in this particular situation there was never a greater need for somebody of very high calibre to be a compliance officer to oversee this whole process and to be aware of the implications of Government accountability and at least to have a dialogue with the DCMS through that process to that effect. So I would give you a very strong recommendation that you should give the WNSL board every encouragement to make the appointment of a high calibre compliance officer. That would be my first concern. I would also draw attention again—forgive me, Michael—to the point Mr Cunnah made earlier, that the improvement of governance had concentrated so far on the improvement of bringing in construction and marketing and other similar experiences at this time. That is not ultimately where the accountability issues arise in this case. They are in financial control, they are above all in legal control. We have not heard of the application of a legal officer, although I believe some are being made, but it is the corporate structure with the independence of those departments to act which is important, and that brings me to my biggest point of concern about governance here, and it is the one to which I alluded earlier. This is why I also said—and forgive the inconsistency of this because I have said to this gentleman we should be looking perhaps towards some indemnity which rather closes the gap with the Football Association—that for me the thing which has gone most wrong here is that the board of WNSL were so dominated by the Football Association's overhang that they did not apply themselves with the vigour of an independent body which was ultimately going to have to be accountable to the ultimate sanction which is insolvency and all that that carries with it. Therefore I think this is a board which should be as clear as it possibly can be in its independence of the board of the Football Association, it should have its mandate to go and build the stadium if it is to do so, but it should do so fully funded with an executive structure and an effective compliance function which ensures they are able to deliver governance in the widest issue.

Derek Wyatt

166.  Chairman, I do not really have the authority to ask this but I would like to ask Mr James if he might consider an A-level essay on "Compare and contrast the Dome and Wembley." You are the only person who could do it. Looking at the British Library, looking at the overspend on various national projects, it would really be helpful, but I cannot really demand it, Chairman, but it just occurred to me it would be good to have a note. I am sure it would be ten pages.

  (Mr James) Alternatively await my memoirs!

  Derek Wyatt: That might be a long time, Mr James!


167.  We would love to read your memoirs, but we are in a bit of a greater hurry than that!

  (Mr James) Can I make one last point, sir? It is very short and it is another one of my pieces of mischief. On 9 January I met—the last occasion I had a meeting on the subject—with Adam Crozier and I added at that time, following earlier discussions which had taken place between the scripting of this letter and 9 January, an extra recommendation which does not appear in print anywhere. I think it is very important. Bear in mind we are talking about a fixed term contract, a fixed value contract here, given the nature of the contract and the party with whom one is contracting here, I would offer you the strongest possible recommendation that you should insist upon a full disclosure to you of the corporate structure of the business which is going to contract to ensure that the asset backing is in the special purpose vehicle which is actually going to provide the execution of the contract.

  Chairman: Thank you very much indeed. I would be grateful if members of the Committee could just remain behind for a moment. Thank you very much indeed, we are most grateful to you.

22   Note by Mr David James: I meant to say "potentially bankrupt" in that NMEC would have been insolvent had it not continued to operate throughout 2000. Back

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