SIXTH REPORT
The Culture, Media and Sport Committee has agreed to the following Report:
WEMBLEY NATIONAL STADIUM PROJECT: INTO INJURY TIME
I SUMMARY
- The concept of a new national stadium at Wembley with provision for three sports has been supported by this Committee, and its predecessor, since the latter's first Report on the subject in 1999. We note that, despite detours, difficulties and delays with the project, work is likely to commence before the end of this year, 2002, on a new home in England for flagship events in football, rugby and, occasionally, athletics.
- The implementation of the national stadium concept has, however, been seriously flawed with the project suffering from self-inflicted injuries, ambiguous Government support and poor supervision by Sport England. Until recently the private sector has been reluctant to commit the funding necessary to advance the project with anticipated completion now some years behind the original estimate of November 2002.
- The overall strategy for delivery of the project involved the advance grant of Lottery funding—£120 million worth. This funding was used principally to purchase the existing Wembley stadium business in March 1999 and develop a design for a new stadium. The project has cost about £139 million to date. The FA has provided about £15 million and running the old stadium has yielded a net benefit of about £4 million. However, until commercial financing has been signed, sealed and delivered, the overwhelming majority of the resources for the project has been provided by the National Lottery. The final commitment of commercial finance for completion of the project is itself likely to unlock £41 million of additional public funding.
- For these reasons we consider that the standards of practice adopted by Wembley National Stadium Limited, and required and enforced by Sport England, should have been commensurate with a publicly-funded project—in other words a great deal higher than they have been.
- The Lottery grant must be returned if the project does not go ahead. However, the clawback of this funding would not be straightforward. It rests not on easily realisable assets, but on an agreement to stage the FA's flagship events at Wembley for a 20-year period. Under this agreement, and the Lottery Funding Agreement, Sport England, in effect, would take the FA Cup and international football games hostage until such time as the Lottery grant was paid off. This would preclude the construction of a national stadium elsewhere. We believe that had these arrangements been more transparent, neither Birmingham nor Coventry would have made significant investments in their respective bids to construct an alternative national stadium.
- We believe that the arrangements for the protection of the £120 million Lottery grant to Wembley are deeply unsatisfactory. They appear to have been dictated in large measure by external events and pressures such as commercial interest in the Wembley site in 1998 and bids by the UK for the 2003 IAAF World Athletics Championships (later switched to 2005) and, particularly, for the 2006 FIFA World Cup. A huge Lottery grant was handed over to establish the foundations of an ambitious project, with consciously ill-defined arrangements in place for the return of the money in a worst case scenario.
- This strategy established poor relationships and incentives amongst the key stakeholders in the project. Wembley National Stadium Limited (the FA subsidiary delivering the project) seems to have been over-confident and over-ambitious; the Government equivocated at a critical moment; Sport England left itself with few levers and fewer options with regard to influencing progress; and even these it did not always use. The 'nuclear' option of taking the initiative to terminate the project and demand the grant back seems to have been so final and so fraught with political and practical difficulties that it is virtually useless.
- A line needs to be drawn between the matters tackled in this Report and the current status of the Wembley project. The issues of the management of the project that we focus upon have been exercising the minds of the project's board, as well as Ministers, since problems were confirmed by independent review in December 2001. Hurdles were set by the Government and seem to have been cleared by Wembley National Stadium Limited (WNSL). We accept that, with the additional safeguards we set out below, the project will be, finally, in reasonable shape to proceed to the next stage should the necessary private sector financing be secured. However, very serious lessons have emerged that need to be learned to ensure that the project proceeds to completion without further mishap and that such a mess cannot be recreated in the future.
- Our key conclusions and recommendations are set out below:
Given the serious allegations concerning a project involving substantial Lottery funding and the potential for further public expenditure, we felt that not to proceed in our customary manner would be to fail in our remit as delegated by the House; in effect becoming collusive in the handling of Wembley and its problems. This we were not prepared to do. (Paragraph 16) We expect that in reply to us the Government will be able finally to report on the future of the Wembley project given the clarity of the Secretary of State's words to the House on 23 May: "Mr Speaker, I am clear—as indeed is the Football Association—that the current negotiations represent the last chance for Wembley." (Paragraph 18) We conclude that Tropus has acted in good faith and has suffered the fate of many messengers with bad tidings. Thorough and independent review has confirmed grave deficiencies in relation to the substantive issues that Tropus alone brought to the attention of the WNSL Board. We note that the Secretary of State, on 23 May 2002, described the first Wembley proposal as over-ambitious, poorly managed and its tendering flawed. (Paragraph 26) In 1999 a deadline of December 2002 to start construction of a new national stadium may have seemed generous. However, the very nature of this arrangement whereby 7 out of 31 acres purchased with Lottery funds can revert to the vendor without recompense is extremely unsatisfactory. It was unacceptable to expend significant public money on assets of which a significant portion could then simply be lost. Such laxity is symptomatic of almost everything to do with this project; one might term it "Wembley syndrome"—an infection to be eradicated in any future Lottery projects. (Paragraph 30) We consider that high standards of conduct, transparency and accountability should have been adopted by Wembley National Stadium Limited, and required and enforced by Sport England. They were not. To regard WNSL as a "private concern" when it was almost entirely founded upon a substantial grant of Lottery money and remains in that position to date, is outrageous. In this we find ourselves in complete agreement with the assumptions of Mr James and Berwin Leighton Paisner and their consequent conclusions. We were therefore heartened by Tessa Jowell's Statement to the House of 23 May in which she made clear that the Government was now acting to safeguard the public investment by insisting on "best practice" public sector standards which would also reassure the market that the project was a worthy one in which to invest. We note the difficulty that this project has had in raising private finance and it is difficult to escape the conclusion that this may have been connected to the nature of the management, and lack of transparency, of the project. (Paragraph 41) The precise legal status of the Wembley national stadium project is crucial to what view is taken of the conduct of WNSL. We believe that the project should have been a private commercial concern. Instead it has been mounted on a quasi-public, semi-commercial basis. Distinguishing between Lottery money for acquisition; Government money for non-stadium costs; and commercial funding for construction—and implying different standards of conduct for each—is utterly artificial. The public money, which also includes funds from the London Development Agency, is all subsidy for WNSL. To safeguard the Lottery funds committed, and to secure the appropriate use of the additional public money identified, this is a project whose execution clearly should have met the highest of standards in accounting and tendering; but did not. (Paragraph 42) We regard the absence of a precise definition of an important obligation for WNSL—its procurement procedures—within the Wembley Lottery Funding Agreement as a serious flaw in the drafting of that document by Sport England and its advisers. Despite the size of the Lottery grant, and the importance of the project, Sport England did not do its job. Possibly, the most important clause in the LFA was allowed to be reduced to a token technicality, easily avoided by WNSL with serious consequences for the progress of the project. (Paragraph 44) We accept the findings of Cyril Sweett and the Office of Government Commerce that the construction contract for the new Wembley national stadium represents reasonable value for money. We note the advice of Cyril Sweett on maintaining the security of the outturn price. We emphasise the need to maintain stringent monitoring and assessment procedures for when the project moves into the construction phase so that the assessments of Cyril Sweett and the OGC can be proved accurate. (Paragraph 55) In addition to the advice of Cyril Sweett, we support the "strongest possible recommendation" made to us by Mr James that a full disclosure must be sought of the corporate structure of the business which is undertaking the contract to construct the Wembley stadium. This disclosure is to ensure that the corporate entity established actually to execute the building contract has adequate assets to cover any liability that might arise. (Paragraph 56) We recommend that WNSL appoint a compliance officer of the highest calibre with specific responsibilities and authority to investigate and report to the Board on performance against the standards of conduct to which WNSL has now signed up. The reports of this officer should be made to the WNSL Board but be available to Sport England, the DCMS and to this Committee, on request. We regard this as an indispensable signal of the sincerity and determination of WNSL to take the project forward with due regard to its public funding and significance. (Paragraph 59) We further recommend that, from now on, all organisations in receipt of Lottery funding of any kind are required to make an explicit statement recognising their responsibilities with regard to the public interest in the relevant project or operations. This should not be in itself an onerous undertaking. However, organisations granted substantial awards should all appoint compliance officers with the specific duties set out above. This whole sorry saga has highlighted an important aspect of Lottery funding, namely that too little of both the granting and monitoring of the funds appears to have been systematic. While this Report deals with the Wembley project, the lessons to be learned apply to all Lottery funding and all Lottery distributors. We therefore call upon the Secretary of State to deal with this fundamental issue in her response to this Report. (Paragraph 60) The new WNSL Board should be as manifestly independent as possible from the Football Association, have a mandate to proceed to build the stadium with the funds, executive structure and compliance function that ensure delivery of effective governance. (Paragraph 64) We conclude that, in not making the implications of the FA staging agreement with Wembley clear to Birmingham, the FA denied the partnership behind that proposal the opportunity to make a realistic assessment of its chances of success. This is particularly unsatisfactory in the light of the assertion by the partnership that the initiative came first from the Football Association itself. (Paragraph 66) Sport England's performance in monitoring the progress of the project has been slack, slovenly and supine. The evidence Sport England gave the Committee indicated that many procurement decisions were reported by WNSL as faits accomplis. Sport England blamed the uncertainty over whether athletics was to be part of the project for a siege mentality adopted by WNSL in contrast to its previous openness over the design process. We have identified the more probable cause as being WNSL's perception that, once the Lottery money was spent, Sport England's legitimate role in the decision-making process was at an end. This is deplorable and should have been identified and tackled by Sport England. We are led to wonder whether the serious failings of Sport England are confined to Wembley or if other projects are in a similar parlous state. (Paragraph 70) We were very concerned at the reduction of available seats for the public, and regard Sport England's agreement to this as a dereliction of duty. Sport England must not agree to any further changes which will diminish the ability of ordinary members of the public to have access to a new Wembley stadium for which Lottery players have paid. We also believe that it is incumbent on Sport England and the Government to make clear when any such changes are applied for, in advance of their agreement. (Paragraph 73) Sport England created a rod for its own back in relation to the Wembley project. The Lottery grant was handed over prematurely and the money was spent on the purchase of the site and the stadium design. WNSL seemed then to behave as if this was the end of the public interest in the project with the bulk of the rest of the funding coming from non-public sources. (Paragraph 78) We repeat that Sport England's protection of the £120 million, the largest single lottery grant ever awarded to a sporting project, entirely fails to meet the standards to be expected of such a public body. We believe that Sport England's performance has been deficient to the point of dereliction. A new chairman of Sport England is due to be appointed. It must be the duty of the successful candidate to examine rigorously the lessons of the Wembley project. An assessment must be made as to whether the unique circumstances prayed in aid by Sport England do confine the failings identified in this Report to the oversight of the Wembley project. Sport England must provide Parliament and the public with reassurance that it has the ability and determination to put its house in order. (Paragraph 79)
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