THURSDAY 23 MAY 2002

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Members present:

Mr Gerald Kaufman, in the Chair
Mr Chris Bryant
Mr Frank Doran
Michael Fabricant
Alan Keen
Rosemary McKenna
Ms Debra Shipley
Derek Wyatt

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THE RT HON TESSA JOWELL, a Member of the House, Secretary of State; THE RT HON RICHARD CABORN, a Member of the House, Minister for Sport; MS SUE STREET, Permanent Secretary and Accounting Officer; MS PHILIPPA DREW, Director of Arts and Sport, Department of Culture, Media and Sport, examined.

Chairman

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.

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.

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.

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.

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.

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 Moffitt, 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.

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 Moffitt'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.

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.

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 20^th.

(Tessa Jowell) This is in relation to seating?

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

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 nto 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 ----

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.

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, as an independent adviser to the FA supported by 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.

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.

I do not disagree that progress clearly has been made and we hope the project will be successful but, with respect, I am not sure that answers my question. Two years before the machine moves into action, one set of bankers has already abandoned the project. It is quite clear from the evidence we have heard from the FA, from Tropus and from Sport England that there were serious alarm bells and it seems that the project was allowed to drift until the banks withdrew. The kernel of my probing is how does the department gather that information and how does it deal with it because it seems that Sport England certainly did not deal with it.

(Tessa Jowell) I have acknowledged and agreed with the chief executive of Sport England that there were deficiencies and weaknesses in Sport England's oversight of the Lottery agreement. I think it is important to remember that, at that point, that was the principal reason for government involvement or government concern about the project, to safeguard the Lottery grant which had already been made. I have acknowledged that there were deficiencies in that process. I have set out in a preliminary way the way in which we intend to address those deficiencies in the future and the remedial steps that we took once the gravity of the David James allegations became clear: informing the National Audit Office an seeking advice, requiring disclosure of the James report to the banks, insisting on improvement in the corporate governance arrangements and clarification both in relation to value for money and the position in relation to athletics.

The legacy from all of this is what appears to be a very inflated price for Wembley. I can only go on press reports but they are talking of in excess of £700 million. I was with an architect who works for Herzog Nomura who designed the Tate. They are involved in building a new stadium for Bayern Munich which will be one of the key centres for the German world cup competition in 2006, a 65,000 seater stadium costing £155 million. We have bought the ground. We have not even cleared the ground and we are in that sort of territory already. Why is it we cannot do these projects properly?

(Tessa Jowell) With respect, you say "we". This is the FA's choice. This is the FA's project and as long as they can fund it they can build a stadium at whatever cost they choose. Patrick Carter went through the option of a cheaper stadium with them. They rejected that option and decided that they wanted to stay with the modified Foster design. This has not increased the share of public money to go into non-stadium costs. We are not, as a government, funding the stadium; we are funding the non-stadium infrastructure. It is an expensive stadium but it is the FA's choice and they will bear the full financial risk. WNSL will bear the full financial risk, so they are free to make that choice.

Mr Doran: The shambles has cost us the world athletics championship for 2005 and a huge amount of national embarrassment.

Chairman

You say it is the FA's project but it is the FA's project on which they have already spent £106 million of public money on land which at best is assessed to be worth just over half that. They have flung away £40 million of public money. Some people say that the land may be worth only £30 million, in which case they have flung away nearly £90 million of public money, so it is not only the FA's project, is it?

(Tessa Jowell) I am not seeking to defend the terms of the award of the original Lottery grant.

Michael Fabricant

I am pleased you said that because although you operate at arm's length the Department of Culture, Media and Sport is ultimately the custodian of public money and that has to be accepted by the department. The department does have that responsibility. Just for the avoidance of any doubt, we all hope that this project will go ahead despite everything but can you confirm quite categorically that there will be no more public funds, neither Lottery money nor section 106 moneys, being made available to WNSL or indeed Sport England or any other organisation if they were to come to you and ask. It is the £120 million plus the £20 million 106 money; no more additional funds to be made available. Can you confirm that?

(Tessa Jowell) There will also be, as I have already made clear, £21 million from the London Development Agency but beyond the money which is already committed and is in the public domain there will be no further public money for this project.

Thank you for confirming that, Secretary of State. You will be aware of the developments that happened on Tuesday. Almost by accident, the Football Association and Sport England revealed to us that in order to protect the £120 million in the worst case scenario the money would be repaid through a staging agreement whereby for 20 years there would be football events going on at Wembley which would generate a revenue stream that would enable them to repay the £120 million. Were you aware of this agreement?

(Tessa Jowell) I was aware that this staging agreement formed part of the terms of the Lottery agreement and also if you refer to your Committee's papers of January 2000 you will discover that the Committee were also aware of this.

We have seen the papers and I have made a point of looking at them but they explicitly did not talk about using the old Wembley Stadium. That was not available to the Committee. This was all new information that came out on Tuesday so again I ask you: were you aware of that before Tuesday?

(Tessa Jowell) I certainly was aware of the staging agreement. However, it is important to set this in context. The staging agreement is an element of the Lottery agreement. I have already made clear to the Chairman that changes to the Lottery agreement will be necessary if and when the deal that the FA are currently negotiating goes to close. The staging agreement was entered into as an agreement between the FA and Sport England as a guarantee for the return of the 120 million in the event that the project did not proceed, in the absence of a parent company guarantee, which as I understand it were unable or unwilling to provide.

You are right to say unwilling rather than unable. Their turnover last year was £170 million and the Football Association is able to return the money. That is why they set up a shell company, WNSL Limited, to protect them from that.

(Tessa Jowell) They were unwilling to provide a parent company guarantee. The staging agreement also was an agreement that was reached before Wembley Stadium was closed. Wembley Stadium has now been closed for two years. If you refer to Patrick Carter's report, you will see that he includes an estimate for the likely costs of reopening Wembley Stadium. I think he gives a figure of about 40 million. He then judges that that would allow the stadium to open for five years after which substantial refurbishment would be needed. I will have to be careful in what I say here.

You will!

(Tessa Jowell) You will make sure I am. This is an agreement between the FA and Sport England. In practical terms, at a point where there is now moss growing on the walls and grass growing up between the seats, does anybody seriously think that this will be the route by which the Lottery money would in practice be returned; rather than Sport England making an immediate claim on the 40 million which would be the cost of reopening Wembley and the subsequent costs that would be involved in making it anywhere that any football fan, however ardent, would want to spend an afternoon? That is the history and I think it has to be seen in the context of the events since the staging agreement was reached.

You asked does anybody believe that. David Moffitt, the chief executive of Sport England does because in the context of this revelation that the existing Wembley Stadium would have to be used in order to generate the £120 million, the Chairman and Frank Doran have already pointed out that the land is only worth, at best estimates, about £50 million and most people would say it was worth only about £30 million. He himself said in that very context, "Birmingham looks extremely remote for that specific reason." He feels that that is the only way that they can generate that £120 million as long as the Football Association continue with their emphatic claim that they are not responsible. Were you ever aware of that?

(Tessa Jowell) I was aware that there was a staging agreement. I was also well aware that the existence of the staging agreement as one of the terms of the Lottery agreement did not preclude the consideration of Birmingham as an option should Wembley fail. I think the chief executive of the Football Association to whom I spoke yesterday about this matter confirms that the position in relation to the FA now is as it was in December when they made clear that, should Wembley fail, Birmingham would remain an option to consider, subject to all the obstacles and difficulties that would have to be considered that he set out in his memorandum to you. In relation to David Moffitt's evidence, of course he has to defend the staging agreement. It is a contract to which he is party.

Alan Keen

I am disputing the figure of 120 million. In answer to a question to WNSL on Tuesday, they said they had made £14 million profit after the purchase of the stadium. If they made 14 million profit since the purchase of the stadium, they must have had a gross income reduced to 14 million by various expenses. Had they not been given 120 million to buy the stadium they would have had to pay rent for the stadium out of the 14 million of five, six or seven million and provided sports facilities for other people. In making that calculation, Sport England could have done one of two things. It could have said, "We will give you 120 million but we know you are going to make a profit over the next period and that profit is going to be enhanced by you not having to pay rent for the stadium. Therefore, we want the rental back, five million", or they could have said, "We will give you 125 million because we gave you 120 million in cash and you are going to gain five million by not having to pay rent for the stadium." Was that calculation taken knowingly by anyone?

(Tessa Jowell) I cannot answer that question. I would direct the question to Sport England. The fact that the stadium was closed and that clearly contributed to the reduction in the value of the site is precisely the kind of circumstance that I would hope more rigorous assessment of the risks associated with the grant wouldtake into account.

I also asked the question about the six months since Wembley closed but it is 18 months. If they could make 14 million profit from the purchase of the stadium when it was closed, why has it been closed for 18 months, because presumably they have had to pay rent to the Millennium Stadium at Cardiff. What I am disputing is that it is not 120 million. Sport England could have given less than £120 million and got some money back.

(Tessa Jowell) There is probably also a loss of income of around 28 million as a result of the closure of the stadium but I am sure you will understand I cannot really give you an answer to that.

I wondered whether you had thought it through that way. Did Sport England have a say in when the stadium was closed? It is public money and if the stadium had stayed open longer that would have made a difference to the amount of money that is needed at the moment.

(Tessa Jowell) I also understand that Sport England were not consulted about the closure of the stadium.

Derek Wyatt

I hope Wembley gets built as fast as possible, but I would ask for information. How many meetings did the former Sports Minister have with Sport England to specifically talk about Wembley? I wonder if you could put that in the public domain?

(Tessa Jowell) I would be happy to accept any request for further information of any kind from the Committee in the normal way.

It is clear that we are pretty unhappy about some of the workings of Sport England and yet the chief executive left his job, depending on what you believe, with between £200,000 and £500,000 of a redundancy and pension package. He seems to me to be one of the most culpable in all this. I want to better understand why he could leave with that money when so much seems to have come to his door.

(Mr Caborn) It was the agreement with Sport England. He was paid up to the end of his contract and there was an extra valuation given to his pension which had been given to a number of employees in a similar way in Sport England which I answered in a parliamentary question. That was the procedure they adopted for other employees. Exactly the same formula was used. I think his contract was £150,000 and the rest was added valuation to his pension up to the norm, which was 75.

I understand that but if there is culpability of Sport England, we have already paid off the chief executive rather handsomely and it seems to me a back to front situation.

(Mr Caborn) Has the case been proven on culpability? At the time the chief executive left Sport England that was not the case.

We asked Tropus - they claim on their website that they are involved with 15 major projects, although I think they only currently have two up and running -- how you buy property and how you previously acquire land and they said something to the effect that it was quite extraordinary to buy up front at 100 per cent of the price. Normally, you would pay a third, a third and a third or varieties thereof. If it is extraordinary, why did we give them all the money if it is normal practice of a third, a third and a third?

(Tessa Jowell) I know you have had submissions which show in what stages the grant was received by WNSL. The way in which the grant was received is again the responsibility of Sport England as the distributor who holds the liability in relation to the Lottery agreement. To look at the broader point, this project has now been subjected to rigorous, independent assessment in relation to the extent to which it represents value for money. As I am quite sure you will accept, that, for me as Secretary of State, was a key judgment in the light of the request for further government money for non-stadium infrastructure. The independent report concludes that this project does represent value for money. It has been subjected to the rigorous assessment of the Office of Government Commerce. I believe that this project which, as David James reflected, was managed in a -- my word, not his -- rather cavalier way, according to commercial rather than public sector standards, has now been restructured according to public sector standards of transparency and propriety and I believe that the fact that that process has taken place, that corporate governance arrangements are being put in place, is one of the reasons that the banks are showing greater confidence now than they were prepared to do before.

One of our recommendations in an earlier report was that there should be a specific Cabinet Minister responsible for international events. We have noticed that we had it for a part of the Commonwealth Games but after June we did not have it. Do you feel that it would be more appropriate to have one single minister, probably from the Cabinet, to look at and hold international events?

(Tessa Jowell) No, I do not. I do not think you need a minister other than the Secretary of State who covers culture, media and sport which in turn encompass a very large number of national events. You refer to the Commonwealth Games. We have a supporting role in relation to the Jubilee weekend celebrations and so forth. No, I do not think it is necessary to have a separate Cabinet Minister with that responsibility. I do believe that my department needs reinforcement in project management and delivery and that work is in hand.

Ms Shipley

Further to your response to Mr Fabricant's questions, could you tell me how Birmingham could be advanced and simultaneously the 120 million paid back, because frankly, from the evidence given by Mr Coward on behalf of the FA on Tuesday it was as clear as mud that those two things could happen simultaneously.

(Tessa Jowell) I am sure that the Committee has Adam Crozier's statement of yesterday and has seen a copy of his letter to Paul Spooner, the project director for the Birmingham programme.

We have not seen that.

(Tessa Jowell) They are available and we are very happy to furnish you with them. To take it in two stages, I think the FA have made clear that the Birmingham bid is one where the design is at an early stage; no contractor is in place; there have been no detailed costings beyond the indicative costings which have been carried out by Patrick Carter; there is no planning permission. The intention is to build on green belt. There is no due diligence in support of the business plan and no estimate of the extent of public funding that might be needed, although I made clear in December -- and it is a commitment which obviously stands -- that the £20 million of non-stadium infrastructure money that would be made available to Wembley would also be made available to Birmingham.

With respect, most of that was reasons why Birmingham probably could not go ahead. What I asked was how could it go ahead given the 120 million which, in the worst case scenario, needs to be paid back. From Mr Coward's evidence, it would seem that the locked in agreement to the FA events, which was in detail alluded to by all concerned who came to us on Tuesday, would preclude that possibility. Also, did your department know that retaining the FA events at Wembley was Sport England's fall-back position?

(Tessa Jowell) Can I quickly read from Adam Crozier's statement from yesterday because he deals with your point. "All parties have recognised that in the event that the Birmingham proposals were to be considered and proved viable it would be necessary to conclude an event staging agreement in relation to the new stadium once current legal commitments relating to the national stadium project at Wembley had been concluded in a way that satisfied all parties." That clearly includes the resolution of the staging agreement because the variation of that would have to be met by both parties. The most effective way of resolving the outstanding staging agreement is to secure return of the 120 million. That is a subject of the contract between Sport England and WNSL. I would not begin to pretend that, were the Wembley project to fail, which nobody wants it to do, we would move quickly or seamlessly to pursue Birmingham as an option. The Birmingham option has essentially been parked since December, when it was quite clear that the FA made their choice to proceed with Wembley. There will be a lot of work to be done but my department would stand ready to assist in that work.

The problem with that answer is how does the 120 million get paid back because they said to us they would need the FA events at Wembley in order to be able to pay it back. That was the only way they would be able to pay it back, they put to us.

(Tessa Jowell) There would be a lot of negotiation between Sport England and the FA in order to secure the 120 million but I have made clear to your Committee before -- I think Sport England have also made clear -- that, were Wembley to fail, we would expect return of the Lottery grant.

Rosemary McKenna

I rather suspect that the decision to build an athletic stadium at Picketts Lock had quite a bearing on WNSL's attitude to Lottery funding. However, that is all in the past and most of what we have been talking about today is historical. I am glad to hear you say that lessons have been learned on how we deal with Lottery funding in the future. Do you believe that we should never in future consider building a single purpose stadium anywhere in Britain? I believe that that is not the way forward. Are you confident that the Wembley proposal, state of the art, multipurpose stadium, can go ahead now and be achieved?

(Tessa Jowell) No. It is not a done deal. It is not yet certain, but this project has made more progress in the last six months as a result of the work that the FA have done with Patrick Carter and other stakeholders than probably in the last five years. I believe that the project should be allowed to run to its conclusion. The key issue is the deal with the lead bank where the FA published their expectations of the timescale, as you know, yesterday. We have to look forward and this is a project that needs positive support generally and practical support particularly. I think that support should be forthcoming until it is absolutely clear that it cannot succeed. It is in better shape to succeed now than it has ever been in the past.

(Mr Caborn) The four conditions that the Secretary of State laid down have been very important in concentrating the mind on the division of responsibility to the FA, Sport England and ourselves and the WNSL in making sure this project can go ahead. The Secretary of State has made more progress in the last six months than in the last five years and, to a large extent, it is bringing some business management expertise to that.

Mr Bryant

Much as I am, as a Welsh MP, quite happy to see everybody coming to Cardiff on a regular basis, I am pretty confident from what we have heard in the last few days that Wembley will now come to pass. The question probably that most Lottery players and most football fans in England are still asking is: has WNSL behaved dodgily? Has Sport England been cavalier? Is Wembley, in the end, a house built on sand? What answer would you give to them, Secretary of State?

(Tessa Jowell) Whatever the weaknesses of this project in the past, I believe that the degree of scrutiny to which this project has been subjected, particularly over the past six months, by the Office of Government Commerce, by my department, by this select committee, by the National Audit Office, by Patrick Carter, by the banks in the course of their due diligence and by Cyril Sweett as the independent adviser on value for money, means that this can be judged to be a robust project. There are some details to be finalised in relation to corporate governance but to repeat what I said I think this project is now in better shape than it has ever been before.

I am sure that is good news and I agree with Rosemary McKenna that it is good to hear the lessons have been learned. I noted earlier that you referred to the issue of risk in the giving of Sport England grants. This is something I would like to see us pursue in the future because it seems intrinsically risky to give £120 million to buy a piece of land when you know that that piece of land, once you have pulled the building down, is not going to be worth that amount and that the organisation has not got a sufficient guarantee. Is that the kind of issue that the department will be looking at in the future?

(Tessa Jowell) That is exactly the kind of process that would be subject to rigorous scrutiny by the Office of Government Commerce mechanism which I have said to you this morning we intend to put in place for Lottery projects which are deemed to be high risk, as part of our responsibility for protecting the public interest.

Michael Fabricant

On the question of responsibility, in answer to Debra Shipley, you said you would accept the £120 million to be repaid, although you were not clear -- and I understand why not -- about how it would be repaid in the worst case scenario, which we hope will not happen. Would you, as Secretary of State, accept responsibility if that money were not repaid?

(Tessa Jowell) Not constitutionally but in the public mind if the money were not repaid I would not expect to escape criticism, but that tends to go with the job.

Chairman: With that acceptance of an exploding parcel, we will all adjourn to the floor of the House.