Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 406 - 419)




  406. Secretary of State, I would like to welcome you today, together with your officials. We would particularly like to welcome your Permanent Secretary. It is the first time she has appeared before the Committee and we are grateful to you for agreeing that she should be present. Because you are under a time constriction of having to make a statement to the House and nobody can be entirely sure when that will be, we are going to do our best to proceed in a fairly brisk way and keep our questions and I hope our answers very much to the point so that we can get through as much as we can within the constricted time frame. You may know that my concern throughout this entire episode has been with the safeguarding of public money which we regard as the principal function of any parliamentary select committee. Therefore, we are especially concerned about what happened with regard to the £120 million that Sport England handed over, apparently to WNSL before even a planning application was sought by the FA or WNSL. First of all, we know that you did not see the Tropus report last December. Was it present in your department at around that time?

  (Tessa Jowell) No, it was not. I think Tropus have made clear in their submissions to you that my department was not included in the circulation of the report.

  407. What was present in your department and resulted in your delaying your statement by two days in December was the David James letter and the BLP report.
  (Tessa Jowell) Perhaps I can make clear that we insisted on seeing the David James report; it was not sent to us in the normal course of business.

  408. We understand that. On page two of the David James letter which, because of our insistence, is now in the public domain, paragraph 2(i) said, "The process adopted by WNSL is unlikely to satisfy best practice standards as usually deemed necessary in any project involving government or Lottery funding." It goes on to say, "This could give rise to censure by the NAO." Did Sport England come to you expressing concern that there were breaches—and those breaches are clarified in other documents, some of which are public and some of which are not—by WNSL of the Lottery Funding Agreement?
  (Tessa Jowell) No, they did not.

  409. Do you not regard it as quite extraordinary that, since you properly regarded the arm's length principle as the appropriate principle and Sport England were custodians of £120 million of public money which they had given away in what some people, including myself, regard as a profligate manner, when a report was available saying that there were breaches of the Lottery Fund Agreement, Sport England did not draw your attention to it, let alone seek to obtain redress for the way in which that money was being misused?
  (Tessa Jowell) Sport England did not have the Tropus report and therefore not the reference to the concerns about the Lottery Fund Agreement either.

  410. We are not talking about the Tropus report. We are talking about the BLP report which you had and which I am assuming Sport England had. Indeed, they did have it. We are talking about the David James letter affixed to the BLP report. Sport England certainly had that and that was available on 17 December last year and caused you great concern. In that report, I remind you again, Mr James said, "The process adopted by WNSL is unlikely to satisfy best practice standards as usually deemed necessary in any project involving government or Lottery funding." That is a document that was available to Sport England as well as available to you. Do you not regard it as extraordinary that Mr James, in a report available widely within the public sector, if one can put it like that, and Sport England made no effort to rectify the situation in which WNSL were said by Mr James to have breached the Lottery Fund Agreement?
  (Tessa Jowell) There are two or three points in relation to that. First of all, my understanding of the chronology is that Sport England received a copy of the James report the day after we did in the department. Secondly, the James report focused principally on matters of procurement of the contract and on corporate governance. He did not deal extensively in his report with the guardianship or the security of the Lottery grant. In relation to the constitutional position regarding the Lottery grant, you quite rightly reflect the position as it is, which is that I and my ministers are at arm's length from the decisions of the Lottery distributors. It is for the Lottery distributor, in this case Sport England, to be satisfied that the terms of the Lottery agreement are being met. However, that said, I believe that there are important lessons in relation to the conduct of Lottery distributors to be attended to from this experience. I am reluctant always to generalise from one very specific, high profile case, but I think there are a number of circumstances in relation to this grant which, were it now or at some point in the future, would have been handled differently. Very particularly, this project, including therefore the safe custody of the grant, had been subject to the risk analysis of the Office of Government Commerce. My Permanent Secretary insisted on the project being exposed to that scrutiny. It has emerged from that scrutiny—and I know that you have seen the documentation—being judged as a project which is robust, which is viable and which should proceed to contract. We have to be more rigorous in identifying those Lottery grants which carry a degree of risk—not that we should exclude risky grants from the scope of Lottery distributors' discretion. I intend to discuss with Lottery distributors—in fact, the matter is being discussed with them today—two things. The criteria for risky projects will be identified and, as a matter of course, Lottery projects where there is considered to be an element of risk, will be subject to the Office of Government Commerce risk assessment before they proceed.

  411. That is examining the lock on the stable door after the horse has got away. As far as I am concerned, I am not seeking to hold you to account for the breaches of the Lottery Fund Agreement by WNSL but there were breaches in the Lottery Fund Agreement. Those breaches were known six months ago. Sport England is the custodian of public money. They had flung £120 million of public money at WNSL/FA before even a planning application had been made. Was it not incumbent upon Sport England, as purported guardians of £120 million of my and other MPs' constituents' money, to be vigilant? Instead, they have been slack to the point of scandal, in my view, about this. I refer you again to this paragraph. We have all been given the impression that the only question about the need to seek return of the £120 million was whether we had a stadium at Wembley did not accommodate athletics. We now find that for months and months and months WNSL have been in breach of the Lottery Fund Agreement and Sport England have not lifted a single finger to do anything about it. If one looks not at the Tropus report, which is private and to which I cannot refer, but at the Tropus memorandum which they submitted to this Committee and which we have made public, if you look at the final paragraph on page four headed "Lottery Funding Agreement", it says, "Until mid-99 we understood that the project was compliant with the terms and conditions of the Lottery Fund Agreement . . ." etc. "No known areas of concern were reported. Thereafter, we believed there were a number of breaches of the terms and conditions of the Lottery Fund Agreement and we became aware of what might be described in our view as a cavalier attitude towards the importance of the LFA and the involvement of Sport England. Regular meetings with Sport England were unilaterally stopped with, in our view, a very dismissive attitude being adopted towards Sport England and the LFA." Is it not a total disgrace that Sport England did not insist on being present at those meetings in which it had the duty of monitoring the use of £120 million of public money?
  (Tessa Jowell) In referring to the Tropus report, you are obviously referring to allegations that were made by Tropus. They are allegations which, as far as I am aware, were not substantiated in material detail by subsequent investigation. There were amendments to the Lottery Agreement at the time when the Wembley Stadium was bought and indeed there were amendments to the financial directions. There are further changes that will be required to the Lottery Agreement if the proposed project, as we now have it, proceeds. David Moffett, the new chief executive of Sport England, when he came before you last week made it very clear that there were lessons to be learned and that Sport England will apply those lessons to be learned. Beyond the changes that have already been made, particularly reprioritising the Lottery as a liability in relation to WNSL, I would have to ask you to be more specific about the broad reference to allegations that are made in the Tropus report.

  412. Obviously I cannot refer to the text of the Tropus report but in the memorandum—and you can talk about unsupported, unsubstantiated allegations—there is a simple statement at the end of this sentence: "Regular meetings with Sport England were unilaterally stopped by WNSL." It is a simple question. Did Sport England attend regular meetings with WNSL about the progress of the project? Either they did or they did not. If they did not, it is a scandal that they allowed this to go on without ever insisting on being present to invigilate on the use of public money. It seems to me from our sessions, including the deplorable display put up by Mrs Bridget Simmonds and other representatives of Sport England in our evidence session on Tuesday, that there is a serious level of culpability and negligence by Sport England in this entire episode. If the government does not acknowledge not simply that there are lessons to be learned but that Sport England has to answer to you for the way in which they have conducted themselves, then I am sorry to say that the miasma of Sport England is cast on the government which I would not like to see as a Labour Member of Parliament, but it is one or the other. Either Sport England is found culpable for its negligence or the government accepts responsibility for Sport England.
  (Tessa Jowell) Sport England accept in David Moffett's words that there have been deficiencies in their oversight of the relationship between Sport England and the Lottery distributor and WNSL. In relation to the Lottery, as you are well aware, the arm's length principle applies. It is the government's job to ensure that there is a proper framework within which the monitoring in order to safeguard Lottery funds takes place. That framework is set in a combination of primary legislation and policy and financial directions. I am advised that in relation to your specific point in response to the Tropus allegation about the absence of Sport England from the meetings with WNSL they attended all meetings of the WNSL board. It is a matter which is very simply cleared up by the question being referred directly to Sport England or by checking the attendance list at the WNSL meetings. It is not information which I, as Secretary of State, in relation to events that occurred two to three years ago, am party to and I regret that.

  413. We accept that. We accept completely that you, operating properly the arm's length principle, were not directly involved in such matters, but Sport England either were or should have been. If you look at appendix six of the BLP report which we have been able to bring into the public domain, at the bottom of page one it says, "Appointment of MPX as preferred contractor." BLP's comment is, "We have not reviewed any evidence which indicates that Sport England's formal prior consent was or was not obtained to awarding this tender which potentially was in breach of the terms of the Lottery Fund Agreement. One of our interviewees has confirmed that Sport England were in fact not directly involved in the decision to appoint MPX as preferred contractor." As you know, there have been allegations which I do not wish to involve you in about the impropriety of the process by which MPX was appointed principal contractor. I do not regard that as an issue for you. On the other hand, it is an issue for Sport England because Sport England flung this money at WNSL and, so far as I can see, have not lifted a finger to protect that money.
  (Tessa Jowell) If I can separate allegation from fact, your earlier remarks related to Tropus allegations. It is in relation to this particular point a matter of fact that Sport England were not consulted. They were not involved in the appointment of a contractor and this is one of the deficiencies of the process and the scrutiny of the Lottery grant that was very clearly acknowledged by the new chief executive when he came before you. I will obviously study with the greatest possible care the conclusions that you reach about Sport England's stewardship of this grant in the light of the evidence that you have received. As I have indicated to you, we are putting in place not just in relation to this but there may be other similar circumstances with other Lottery distributors where scenarios are being created at this moment. We have to create a balance between the risks that Lottery distributors are proposed to expose Lottery players' money to and legitimate and proper safeguards, because I regard us in government, me, as Secretary of State, as having in the public view a responsibility to make sure that Lottery money is properly spent.

  414. If there is time after my colleagues have put their questions, I will come back to Kate Hoey's question that you answered in the House on the 20th.
  (Tessa Jowell) This is in relation to seating?

  415. Yes. I regard that as a disgrace as well. Before I call Frank Doran, who has done an incredible amount of work on this, I would like to put this to you: we just held a press conference on our report on the Commonwealth Games. I was talking to a distinguished journalist who had visited Dwight Robinson's Sports College in my constituency which put in a bid for the most minute fraction of this £120 million to build a sports hall which would also have been a community facility for an entire deprived district in Manchester. They turned that down; whereas almost without nodding they handed over £120 million of public money to a project which is one of the most controversial and so far unsuccessful projects that this country has seen.
  (Tessa Jowell) I think that concern is reflected by many people and I am well aware that public confidence in the way in which Lottery money is spent is directly reflected in the number of people who are prepared to buy Lottery tickets every week.

Mr Doran

  416. I want to pursue the initial point taken by the Chairman because I think it is important to tie down exactly where responsibility lies in a situation like this. I appreciate your position and the department's position. It wants to keep itself at arm's length but at the same time there is a heck of a lot of public money here and it is important to look at it in some detail. First of all, there is the issue of the land. We have heard evidence, which you may or may not have been briefed on, that £103 million of public money was spent on the land. It is quite clear that if this project does not go ahead the residual value of that land may be as low as £30 million. That concerns us greatly. It is an issue which is central to our concerns because of the way in which this whole project has been managed. We heard on Tuesday that it is possible that the England team and major FA games will be forced to be played at a refurbished Wembley. I am not sure who would pay for that. That is a pretty disastrous situation all round. I am concerned at some of the responses that you have given in relation to the Tropus report. We know, and you have confirmed today, that you did not see it and that your department did not have a copy of it, but the FA did advise us that the DCMS should have been aware of the report because, although it was not circulated, Patrick Carter was advised and Tropus met Carter in July or August of 2001. Can you say a little about the way in which your department keeps itself abreast of these sorts of projects because that was a clear warning sign at the time when the Tropus report was being put together.
  (Tessa Jowell) You are absolutely correct to say that I have not seen the Tropus report. I have however six months ago studied both the first draft of the David James report and the subsequent report by David James, which were an investigation into the Tropus report which was essentially a dossier of allegations. Having gone back carefully through the chronology of the previous months, it is quite clear that Patrick Carter and his review team had discussions with Tropus. It is also important to add to the already rampant complication of this whole business that there were two Tropus reports. One looked at the costs and attempts to reduce the costs of the stadium. The second is the dossier of allegations about the conduct of the procurement. The first Patrick Carter saw; the second I understand that he was aware of and I think it is fair to say that there was a pervasive awareness of allegations of impropriety in relation to the procurement of the Multiplex contract and the issues that were subsequently systematically investigated by David James. I was aware that there was about to be a report on these allegations very shortly before we were expecting to make a statement to the House saying that we were going to go ahead and support the FA in developing the stadium as their preferred location at Wembley. You will remember that on 19 December, after a period of pretty steamy engagement with the FA about the David James report and its allegations, I made a statement to the House in response to a Private Notice Question saying that the government would not proceed to invest further money for non-stadium infrastructure costs unless four conditions could be met. The judgment that I had to make at that time was whether this was a project which was so fatally damaged and tainted that—

  417. At that time, we heard from Mrs Simmonds on Tuesday, that 113 million of the 120 million had already passed to Wembley, so we are talking about quite a small figure.
  (Tessa Jowell) Yes. I had to make a judgment about whether or not this was a project that could be retrieved. I had the benefit of Patrick Carter's independent review and his independent advice which, as you will remember, I published on the day that I responded to the Private Notice Question on the floor of the House. At the time, the reason for my statement, the claims of further delay and the reasons for the conditions I was setting were not generally understood, the problem being that they arose from my scrutiny and my officials' scrutiny of a report which we had secured with some difficulty under conditions of legal privilege. That therefore explains the terms of my statement at that time and the chronology leading up to our engagement with the substantive issues that both Tropus and James raised.

  418. You have explained how you reacted to the information which came to you in December of last year but there is still the issue of how the department itself, which has responsibility for Sport England, advises itself as to what is going on in particularly a major project of this sort. The Chairman has read out already a number of quotes. I will not repeat them but the Tropus report makes it clear that the FA were behaving in what could best be described as a cavalier manner towards Sport England and they were effectively cut out of the loop in terms of a number of issues. They also made a comment in their report later on which said, "Relationships between the key stakeholders in the project deteriorated. Roles and responsibilities had become confused and it was unclear on what basis the project would proceed." That is a pretty serious statement about a major project. We also heard evidence that Sport England had two representatives at board meetings of WNSL so all of these issues were being discussed, including the Tropus report, and it is confirmed by David James that the Sport England representatives were present at the board meetings. That is also covered in schedule six of his report, where he says that the Tropus report was not circulated to them but they had a representative present at WNSL board meetings. An awful lot of alarm bells were ringing. Were these picked up in your department? I do not mean by receiving the James report but long before the James report was commissioned. Everyone else seems to have been aware of them.
  (Tessa Jowell) They were certainly picked up by Patrick Carter and if you look at Patrick Carter's recommendations to me and his advice in relation to the further development of the project, you will see that his recommendations reflected the concern about the quality of corporate governance. They reflected what you rightly say was a confused and at times ambiguous line of accountability, which is a subset if you like of the corporate governance issue. They reflected the lack of proper financial control through lack of internal management processes. I think what we had over last summer was a process in parallel in that David James was investigating the specific allegations raised by Tropus. Patrick Carter, whose independent advice was given to the FA and the Government, was also conducting a review on the viability of the Wembley project and drew precisely the same conclusions about the shortcomings and therefore the remedial action that needed to be taken as did David James.

  419. All of this was happening in 2001. The problem started in 1999 and I do not think anyone disputes that, James, Tropus or anyone else. That is two years down the line before we see any significant action. In the meantime, £103 million of public money has been spent and the WNSL had their hands on another seven or eight million of that money. That seems an awfully long time before there is a response.
  (Tessa Jowell) It was when the project failed to attract banking support and the syndication failed that the FA came to the government in May last year and asked for £150 million from the government in order to proceed. You are absolutely right to say that by that stage—and I know this is a great preoccupation of the Chairman's—the government had an interest in this project from which it could not escape. I think there is a critical issue about positioning the government if this project proceeds, if the banking succeeds and the FA continues with its development. I think the involvement of particularly Patrick Carter's review team and the government has been beneficial because what we have seen over the last year is the progress of this project which was evidently tainted by allegations, not sustainable in the view of the banks, moving to a position where considerable progress has been made on corporate governance. Despite the doubts about procurement, the independent report commissioned by the FA, a copy of which I have placed in the library, by Cyril Sweett, has deemed it to be value for money and the outstanding issue in relation to the status of athletics at Wembley has now been satisfactorily settled. Progress has been made and I believe that progress should be allowed to continue.

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