Examination of Witnesses (Questions 380
TUESDAY 21 MAY 2002
380. Mr Fytche, £120 million was given
contingent on Wembley going ahead and it has said that is the
best way of ensuring that £120 million is secure, although
I put it to you that cannot be done at any cost, which is the
implication of what Mrs Simmonds was saying. I want to ask you
this: if you make an offer of money contingent on something happening
you must have a fallback situation if it then does not go ahead.
So when £120 million was given contingent on it being returned
if the project did not go ahead, what on earth were you thinking
of if there were not the guarantees that the money could be returned?
(Mr Fytche) I would like to take that on two points,
first of all the original decision and then the security conditions
that followed. I think, as I explained earlier, the original decision
that the Council took was based upon a very thorough appraisal
of a whole range of issues, not least the value of the site and,
as I said, we required WNSL to commission and present to us a
very thorough and comprehensive valuation which they commissioned
from Coopers & Lybrand.
381. But that is now wrong, we now know it to
be wrong, or has something changed and the value is now 30 million
as opposed to 120 million to secure the loan?
(Mr Fytche) The value that they estimated was based
upon a business valuation and, as we have discussed this morning,
that includes the value attached to the contract between the Football
Association and WNSL for the staging of the FA's events. The business
valuation that came forward at the time was thoroughly evaluated
and considered to be correct by a whole range of people.
382. Do you think with hindsight that was right?
(Mr Fytche) I think the decisions that were taken
at the time by the Council were correct.
383. That is not my question. You talked earlier
on about the bankability of the money. Was the money banked in
your opinion with hindsight?
(Mrs Simmonds) The money is banked because we have
the staging agreement that allows us to reclaim all that money
384. But we have already heard from Mr Moffet
you will not get the money back unless the project goes ahead.
(Mrs Simmonds) If the project does not go ahead we
still have an agreement with Wembley National Stadium that they
will run FA events there for 20 years, so all we are talking about
is the time it takes to come back.
385. You will need a darn sight more than 120
million because presumably you are going to take net present value
and in 20 years' time 120 million is going to be worth a lot less
than it is at present.
(Mrs Simmonds) There would be a requirement to refix
the site to make Wembley National Stadium, as it is, work and
for events to be held there over 20 years. So we would still have
a national stadium and the money that was taken in revenue from
that stadium would go to repay the Lottery grant.
386. The way you describe it it hardly seems
worth building a new national stadium if in that case it is so
marvellous that it can run events there as it is at present.
(Mrs Simmonds) It is not marvellous to run events
there at present but it is a way of us reclaiming the money. That
is the protection that we have got which is in the Lottery Funding
Agreement. The Lottery Funding Agreement is signed by the FA and
by WNSL and the way that we have of reclaiming that money is through
the staging agreement. We would hope, as I think David has said,
there would be a way of WNSL just giving us back the £120
million and it may be possible then to proceed to look at another
possible site for building a national stadium. The value of the
site really is immaterial to that, the most important thing is
that we can reclaim the grant.
387. Mr Moffet said that he recognises there
were deficiencies "putting it mildly", and I quote.
Mr Fytche, how can we believe anything you say when Tropus said
to us that Sport England were presented with a whole series of
fait accomplis and Sport England did nothing about it?
(Mr Fytche) I repeat what I said, we did take action
on the basis of the procurement strategy.
388. Were Tropus wrong?
(Mr Fytche) I think Mr Maslin referred to this earlier
389. Were Tropus wrong?
(Mr Fytche) I do not recall what Tropus said on this
issue this morning but what I do know is that we received a procurement
strategy from WNSL with which we were not satisfied and on the
basis of that the grant payment ceased for a period of time. Clearly
below the level of strategy within the company a whole range of
issues have been reported on, those issues are serious and, as
Mr Moffet has said, we are taking every step to make sure that
monitoring procedures are rectified and robust.
390. We have heard that. You lent money to WNSL.
You knew that WNSL's ordinary shares were wholly owned by the
Football Association. Did you at any time ask the Football Association
to give financial guarantees, which of course is quite normal
in this situation when you are dealing with what is in effect
a shell company?
(Mr Fytche) There was a series of discussions at the
time about what was an appropriate security package to take in
respect of the grant and what was arrived at was a very clear
decision by the Council to put in place a security package.
391. Did you ask the Football Association to
give a guarantee given that WNSL was just a shell company and
the FA owns all their shares?
(Mr Fytche) It was one of the considerations at the
392. Did they refuse?
(Mr Fytche) They came back with the proposal to put
in place the security package which the Council believed was robust.
393. How long is it since Wembley was used?
I have forgotten now, was it the last of the play-offs?
(Mr Fytche) It was the England-Germany match in October
2000, from memory.
394. Six months ago.
(Mr Fytche) Over a year ago now.
(Mrs Simmonds) Eighteen months ago.
395. It seems longer. Eighteen months ago. Sport
England gave money in order to get a national stadium but in the
agreement, or when you were talking to the FA, did you have a
date in mind because obviously that money would have earned interest
in the bank or would have been used by other organisations? It
is a lot of money. Did you have a date in mind?
(Mrs Simmonds) When we gave the money obviously we
wanted the project to go forward as quickly as possible and I
would remind you of the fact that when Trevor Brooking was here
he talked about how we had agreement in 1999 to go ahead, everyone
was in favour, and there was then a lack of clarity by the Government
it should go forward at that stage. I think the subsequent report
by Patrick Carter has indicated that not only was it a clarity
issue but the funding was not in place. I think we have to think
about what a complex project this is and what size of figures
we are talking about. I am involved in one of the very few PFI
projects, which is a leisure centre near Cambridge, that has got
25 different legal agreements for a project that has is worth
5 million pounds. Multiply that into the complex project that
we have here and it takes time to get over it. We regret that
it has taken this amount of time but we still believe, and I do
not think it is right to say I said at any cost, I do not think
it should be at any cost, and I do think quite clearly that the
reports that we had from Cyril Sweett and, indeed, David James
make it clear that it is still value for money, that there was
not any corruption, that there was not any impropriety, and it
is on that basis that we believe it should proceed.
(Mr Fytche) May I just offer a slight amplification
of that. Clearly the Council has taken very seriously the timetable
delays that have taken place in the project and has considered
month by month at its Council meetings what the stance of the
Council should be. There have been delays, that is regrettable,
but it has been the policy of the Council to consider this seriously
month by month to review what progress is being made, particularly
during the extensive review process that took place during last
year leading to Patrick Carter's report in December.
396. It is an awful lot of money to be sitting
doing nothing. The DCMS has been criticised many, many times because
there is a lot of money held back by the Lottery to fund schemes
that have been agreed, so there is a mass of money actually not
used, I do not know whether it is in the Treasury or whether you
have got it. In this case £120 million was not really being
implemented. You have just heard me ask Mr Maslin did WNSL make
a profit after the £120 million was handed over and he said,
yes, £14 million. Presumably that was just up to 18 months
ago when Wembley was closed. Did you not think at the beginning
that if this was going to go on that maybe the Lottery ticket
purchasers should have had some of that profit that Wembley was
making and then Wembley closed, and it has been closed 18 months,
but it could have been making more profits if it had stayed open
and you could have had some of that back for the benefit of the
(Mr Fytche) The requirement at the time on WNSL from
any retained profits that they would make would be to put them
back into the project. So conceptually there was the grant, there
was the stadium and it would be making money while it was operational
so we did require them to retain that and use it for the purposes
of the project. I think it was also important to bear in mind
that the directions which govern what the Council can do in respect
of Lottery grants prevent it from making an investment. The concept
of putting money in to make a percentage on top of that does not
exist under the directions. It was a grant awarded for a specific
purpose and it is that purpose that we are required to protect
as the project moves forward.
397. I have only got one question. Mr Moffet,
I think you said that the best way to protect the £120 million
of public money is to make sure that the project goes ahead. Would
you concede that to have got to a situation where not only the
best way but actually the only way of protecting £120 million
of public money betrays a problem in the original arrangements?
(Mr Moffet) I think I have already conceded that there
have been problems. I would like to say that I was not just referring
to Sport England before when I said that there were a lot of issues,
I can see there are a lot of issues right across the project.
We are where we are and for somebody like myself coming in and
reviewing the project, whilst I might like to revisit history,
it is really
398. I understand the point about the present
arrangements but I am trying to get at what seems to me to be
quite an important nub here which is that if you set up a wholly
owned subsidiary of a body which is not going to end up being
liable and in the meantime you give them more money than they
have as assets in one fell swoop, for the future if you were to
go down that route again I think you would find this Committee
would be extremely critical of you because you would not have
seemed to have learned a lesson.
(Mr Moffet) I think there are lessons to be learned
and I think you can take it that those lessons have been learned.
I am not able to add any more than that other than we are reviewing
all of our processes.
(Mrs Simmonds) I think this project is unique and,
as Chair of the Lottery Panel, I can say that we would not go
down this route again but there are two ways of doing it, either
we proceed with the project or we accept that we have a robust
Lottery Funding Agreement that allows us to reclaim the money.
399. And there is nothing wrong with coming
(Mrs Simmonds) I do apologise. There is nothing wrong
with coming to Wales.