Examination of Witnesses (Questions 406
- 419)
THURSDAY 23 MAY 2002
THE RT
HON TESSA
JOWELL, MP, THE
RT HON
RICHARD CABORN,
MP, MS SUE
STREET AND
MS PHILIPPA
DREW
Chairman
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.
|
