Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 260 - 279)



  260. Let me sum that up. Sport England then, from what you tell us, and we shall be seeing Sport England later this morning but your side of the understanding is important, knew that you were conducting a process that was contrary to the Lottery Funding Agreement?
  (Mr Maslin) No. Let us be clear again. We launched a competitive process in July 1999 to 11 parties from which we had five tenders back. At that time we had this other offer from Multiplex which again seemed in that sense very attractive. We were not sure commercially whether that would fly in the market and therefore we did test that possibility in the market at the time because at the end of the day what we were trying to do on a limited budget was get the best competitive offer and the lowest cost and hopefully the best value for money. Looking at it in hindsight, we perhaps should have thought through some of the pressures that were likely to arise at the time and got a process in place for dealing with those in advance and make sure that there was a clearer system of keeping everybody informed. I believe that is now in place. We have learned from that. We did not have completely transparent processes. I believe we have moved on from there.

  261. Did Sport England know that you did not have completely transparent processes? Did they know the processes when they were conducting this? Mr Cunnah said, in a phrase for which I do not criticise him but which has a certain redolence, that you were in partnership with Sport England. I regard it as utterly inappropriate that Sport England as a Lottery funder should be in partnership with you. Did Sport England know of the processes which you were using which we now know through the James report were contrary to best practice?
  (Mr Cunnah) To clarify the question as to which procedures we were using, to come to your question, sir, initially we sought clarification and received it that in order to satisfy the Lottery Funding Agreement we did not need to follow the OJEC procedures. Sport England were aware of that and agreed with that at the time. As to the departures from best practice on, let us call them procurement procedures, I think Sport England became aware of those departures and deficiencies that Mr James outlined at the same time as the rest of the board did and dealt with them appropriately.

Mr Doran

  262. My understanding of the Lottery Funding Agreement was quite specific. Going back to Mr Maslin's point, if what you say is correct how is it that in Schedule 6 of the Berwin Leighton Paisner report, part of David James' inquiry, they can say quite specifically as far as the appointment of MPX as preferred contractor is concerned, "we have not reviewed any evidence which indicates that Sport England's formal prior consent was or was not obtained in awarding this tender which was potentially in breach of the terms of the Lottery Funding Agreement in terms of the process which had been followed in its procurement". One of our interviewees has confirmed that Sport England were in fact not directly involved in the decision to appoint MPX as preferred contractor. That seems to be totally at variance to what you are telling us today.
  (Mr Maslin) Again, our intention at the time was to get the most competitive procurement process. We had monthly board meetings where Sport England were party. As I said earlier on, it is fair to say that perhaps we did not provide sufficient transparency throughout the whole tender process.

  263. Let us move on. This is obviously an extremely important project, not just for the FA but for the country. If we look at the Tropus report, the James report and the report from Berwin Leighton Paisner, there are serious deficiencies in the ways in which WNSL, and perhaps also the FA who also have some responsibility here, have handled the whole project. We have heard from Mr Cunnah and other witnesses that efforts have been made to put everything right, but do you accept that you have a big job to do to restore confidence in this project and to restore confidence in the WNSL and their ability to deliver this major national stadium?
  (Mr Cunnah) We have already started to rebuild that confidence. We have offers of financing in place. Those offers would not be there if the banks were not confident about our ability to deliver the project. As I said before, we have had stringent reviews from people like the Office of Government Commerce, who have looked at all our resources and our procedures and said that we are really well placed to make this a very successful project. As you alluded to before, we believe we are very close to getting all of the banking in place. We believe that we will sign the mandate, the heads of terms, within a week, and documentation for completion of the process will follow as soon as is appropriate thereafter, making sure that we do everything right to get everything in place.

Mr Fabricant

  264. Mr Cunnah, you spoke at some length about the various stakeholders, as you put it, in this arrangement. I just want to really establish the legal position regarding the relationship between the Football Association and WNSL. WNSL is a limited company. Who owns the shares?
  (Mr Cunnah) The ordinary shares are 100 per cent owned by the Football Association. The golden share is owned by English National Stadium Trust which represents Sport England.

  265. I am quite interested in the relationship of the golden share, but we will come back to that in a moment. Are there any guarantees that the FA has made in order to seek to limit the independence of liability that WNSL enjoys by virtue of the fact that it is a body corporate? If you are unclear what I am asking, let me give you an insight. We will all be familiar with ITV Digital which is a wholly owned subsidiary of some very senior and major broadcasters, but those major broadcasters say that any debts to the Football League need not be payable other than from assets owned by ITV Digital. In other words, it could be argued that Granada and Carlton are hiding behind the body corporate nature of ITV Digital. Similarly, is the Football Association independent and separate from any liabilities that might be incurred by WNSL?
  (Mr Coward) I will try and answer that on behalf of the FA.[3] I have heard the comparison between the two and the comparison is not a correct one.

  266. Why?
  (Mr Coward) The reason is this. The disputes between the Football League and Carlton and Granada is that there may or may not have been, depending on which side you take, a parent company guarantee from ultimately Carlton and Granada through to ITV Digital, through to the Football League. As between Sport England, Wembley and the FA there is no dispute that at any time there was a parent company guarantee in the contracts between us.

  267. Can I clarify that? There were a couple of negatives there. You are saying that there is no guarantee?
  (Mr Coward) There is no guarantee.

  268. So WNSL stands on its own?
  (Mr Coward) The Lottery Funding Agreement sets out the obligations which the FA have to Wembley National Stadium which it had agreed with Sport England at the time. Those are extensive obligations and one of the key ones relates to the staging agreement that the FA entered into—it had to enter into—with Wembley National Stadium Ltd in 1999 in order to ensure that Sport England could be confident of the "bankability", as they described it, of their grant to Wembley National Stadium Ltd. That staging agreement was renegotiated at the time to the satisfaction of Sport England and that is in effect a key element of the security package which Wembley has had to grant to Sport England for the Lottery money. As I understand it, it is a comprehensive security package over the entire business.

  269. Let us be clear now. There is £120 million which has been given by Sport England, public money. You are saying that there are agreements between WNSL and the Football Association who guarantee that money. Are you saying that in extremis—you are not saying?
  (Mr Coward) No.

  270. Let us just clarify this. Let us take the worst example. In the worst example £120 million would have to be returned to Sport England. Who would be responsible for that repayment?
  (Mr Coward) Wembley National Stadium Ltd is liable for any such repayment under the Lottery Funding Agreement. What would happen at the time is that the stakeholders, the partners, of Wembley National Stadium Ltd, I am sure, would be called together by the company, those being Sport England, the FA and, I would assume, Government—the partnership approach has been adopted in the last six months—in order to address that issue there and then.


  271. Let us just clarify that. This is something I want to be absolutely clear on, and that is that of the £120 million, however it was paid, whenever it was paid and in whatever tranches it was paid, all of it was paid to WNSL; none of it was at any time even at the earliest stages paid to the FA?
  (Mr Coward) That is correct.

Mr Fabricant

  272. But, Mr Coward, you just said to me that when the money was passed over Sport England needed to be satisfied that WNSL would be in a position to repay it and you said that—I cannot quote you exactly but we will look at the record later on—some sort of guarantee or comfort, if I can paraphrase, was given by the Football Association. I am not interested in any discussions that might happen if the worst comes to the worst. I am interested in what has actually happened so far, so what guarantee has the Football Association given to Sport England that gave them the comfort? You just said "none" so how could they get comfort from it?
  (Mr Coward) There is no guarantee. What Sport England had to do at the time, and you are seeing them after this session, I understand, was to satisfy themselves that they had good security for the Lottery funding that they were providing to Wembley National Stadium Ltd. As part of that they took a security over the entire business. That includes as a key element a staging agreement with the FA. That staging agreement is an agreement by which the FA must, whether it is the old stadium or the new stadium, take its events to Wembley National Stadium and pay a price for that. At the time Sport England had to satisfy itself that that contract, together with the rest of the security package, was bankable for the grant it was making available to Wembley National Stadium Ltd.

  273. The money needs to be bankable. In David James' letter to the former chairman of Wembley National Stadium Ltd he says, "I understand that abandonment of the Wembley project—I hope that will not happen—at the present date"—and the date was 17 December 2001—"would involve a write-off of £75 million". What would be the write-off if there were abandonment now?
  (Mr Maslin) If the project did not go ahead, as Nic Coward has said, the liability falls to WNSL. The cost itself, if you like, would probably be in the order of £70 million.


  274. Could I just interrupt there? This seems to be as good a time as any to ask two questions. First of all, are you confident that the project will go ahead? Are you confident that you will have an agreement with West LB?
  (Mr Maslin) As you know, we are in discussion with West LB. We have had an offer in principle from the board of West LB where the West LB board and the FA board are in agreement, along with the WNSL board. We are going through the usual process of due diligence. In order for the West LB board to get their approval we have had to take the due diligence to a sufficient state. That is being done and therefore we have got the approval. This is a complex project. There are a lot of legal documents to put together and over the course of the next weeks—weeks rather than months—we are confident, yes, very confident, that we will bring a successful funding through.

  275. So you are confident that you will be able to go ahead, that you will get the money to build the new Wembley stadium?
  (Mr Maslin) Correct.

  276. Can you tell us when you believe that this will be signed, sealed and delivered?
  (Mr Maslin) Chairman, as I said, this is a complex process. It will take, I am afraid, as long as it takes but it will be weeks rather than months.

  277. So you believe that the whole thing will be tied up and you will be ready to go some time before the end of June?
  (Mr Maslin) As I said, it will take as long as it needs to take but it will be weeks rather than months.

Mr Fabricant

  278. I am still concerned about the process of the relationship between Sport England, who are the stewards of public money, and the bankability—words you used and quite rightly so—of public money in the hands of WNSL. You said that the write-off would be £70 million if this does not go ahead. You have also said that only WNSL would be in a position to be liable because the FA, although they are 100 per cent shareholders of the ordinary shares, have given no guarantees over and above the guarantees that have been used for the venue. My question is this. If, in the unlikely event—and hopefully it is an unlikely event—that the project does not go ahead, how much is WNSL going to be able to repay? Is it the £50 million, which is the difference between £70 million and the £120 million? Is it merely £30 million, which is the money suggested by my colleague, Frank Doran, and a number of people have said is the value of the loan? Do you think as a Finance Director that Sport England showed due diligence themselves in determining what is bankable and what is not?
  (Mr Maslin) Clearly, if we got to that situation, that we could not obtain funds from, say, West LB, then immediately we would have an urgent discussion with all stakeholders, the FA and Sport England. As Michael alluded to earlier, there are a number of options open to us. We do still have an operating staging agreement with the FA and provided we can provide the services available at Wembley Stadium, we can hold the FA to bring their games to Wembley, so one of the options that we would be looking at would be clearly whether we would have to re-open the old stadium.

  279. But you would still be liable, is that not correct, under the Lottery Funding Agreement, to return the £120 million?
  (Mr Maslin) Yes, it is quite clear in the Lottery Funding Agreement. It is WNSL and WNSL alone which is liable for the £120 million.

3   Footnote by witness: The widely reported (April-May 2002) discussions concerning ITV Digital have been between ITV Digital and the Football League, not the FA. Back

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