Select Committee on Public Accounts Fourteenth Report


The Committee of Public Accounts has agreed to the following Report:



1. In July 1997 the Millennium Commission approved a lottery grant of up to £449 million to the New Millennium Experience Company (the Company) for the purpose of building and operating the Millennium Dome at Greenwich and for organising a range of events nationally to celebrate the year 2000 (the National Programme). The Commission's aim was to create a Millennium Exhibition of a scale and stature comparable to that of the Great Exhibition of 1851, and the Festival of Britain of 1951. The project was approved by the Commission on the basis that it would achieve a balanced budget - costs and income of £758 million. The approval was also on the basis that there would be 12 million paying visitors to the Dome during the year 2000.

2. When the Commission approved the original grant they expected £50 million to be repaid after the closure of the Dome on 31 December 2000, making a net grant of £399 million. However, the Company experienced severe financial difficulties during its year of operation, with both visitor numbers and revenue being much lower than planned. Since the Dome opened on 1 January 2000 the Commission have awarded the Company additional grants totalling £179 million. By September 2000 forecast expenditure had risen to £793 million, and forecast visitor income was £53 million against the £169 million planned. The Company's net lottery grant had risen to £628 million - an increase of £229 million (57 per cent).[1] Expenditure by the Company since the Dome closed has been funded out of that grant.

3. To ensure that, if necessary, additional funds could be made available to the Dome project without jeopardising the Millennium Commission's other programmes, the Government confirmed in June 1997, in line with the previous Government's commitment, that it would bring forward an order in Parliament to extend the period during which the Millennium Commission could draw on National Lottery funds.[2] An order extending this period from 31 December 2000 until 20 August 2001 was laid before, and approved by, the House of Commons in December 2000 (SI 3355).

4. The Government planned to sell the site once the Dome closed at the end of December 2000 . A competition to find a purchaser started in March 1999. That competition was on-going at the time of our predecessor Committee's inquiry and therefore they did not examine the process.

5. On the basis of a Report by the Comptroller and Auditor General[3] our predecessor Committee examined the New Millennium Experience Company, the Commission and the Department for Culture, Media and Sport on the organisational arrangements for the Dome; visitor numbers; sponsorship; financial management; information to Parliament; and issues relating to staffing. This Report is based on the evidence given to our predecessors at the time of their inquiry.

6. The Dome has required £229 million more public money than originally planned, mostly because of the significant shortfalls in visitor income and sponsorship, particularly the former. This Committee has additional concerns which, in summary, are as follows:

  • The organisational arrangements for this project were elaborate and complex, and gave rise to confusion and disagreement among the parties involved as to exactly who was responsible for what. Three distinct bodies (the Company, the Millennium Commission and the Department) were involved, one with the dual status and responsibilities of a limited company and a non-departmental public body, and each with an accounting officer accountable to Parliament. The internal structure of the Company was not ideally suited to the task, and the difficulties experienced by the Company during the Dome's year of operation resulted in a number of changes at senior levels, so compounding the organisational complexity. These arrangements clearly did not work well.

  • The Dome was a new and unproven attraction, yet to be viable it needed to achieve 12 million paying visitors in just one year. The risk posed was exacerbated by setting this target before anyone knew what would be in the Dome, what it would cost to visit the Dome, and how 12 million people would get there. The Company then failed to get operational expertise early enough and to market the Dome effectively. By the end of September 2000 the Company had received less than a third of the visitors required, and was forecasting visitor income of £53 million compared with its target of £169 million. Despite the risks, the only contingency plan was to return to the Millennium Commission for more public money.

  • Following a specific request by the Company's Chairman and in the light of the Company's financial difficulties, the Department gave an indemnity to the Directors in June 2000 which could have resulted in new and significant calls on voted monies, but did not inform Parliament at the time. We consider that this guarantee amounted to a specific new commitment which should have been reported. It was not framed simply as a confirmation of a pre-existing indemnity, as the Department suggested.

  • Not until late in the day did the Company, the Commission and the Department face up to the financial problems on the project and the issue of the Company's solvency. It was clear before the Millennium Dome opened on 1 January 2000 that there were likely to be financial difficulties, and by late January there were real concerns about solvency. But the problem was not quantified until August, and even then it took the appointment of a new Executive Chairman to initiate the required investigations.

7. Our more specific conclusions are as follows:

On the organisational arrangements

      (i)  There should be clarity in the arrangements for managing such projects, in both design and implementation. The Company told the Committee that those involved in the Dome project had found the lines of responsibility confusing, and that there had been disagreement as to where influence and authority lay. Effective control and oversight of the use of public funds, and full accountability to Parliament is essential (paragraph 13).

On visitor numbers

      (ii)  By the end of the year, the Dome had attracted 5.5 million paying visitors compared with the 12 million on which the Company's business plan was based. The resulting shortfall in income is the main reason for the financial difficulties of the project. The Company received much less visitor income than the £169 million in the business plan (paragraph 25).

      (iii)  The Millennium Commissioners agreed the Company's target of 12 million paying visitors, and provided lottery funding based on it. But the target was set before final decisions had been taken on the Dome's contents, ticket prices, marketing strategies and transport arrangements. It meant that the Dome would have to attract in just one year, and from a standing start, more than four times as many visitors as the next most popular UK 'pay-to-visit' attraction (Alton Towers) achieved in 1999. In approving the target of 12 million visitors the Commissioners went against the advice of their own staff, who recommended planning on the basis of 8 million (paragraph 26).

      (iv)  The Company's whole marketing strategy, the marketing mix, the pricing strategy, the opportunities for discounts - and when they were offered, how and to whom - was learned only by experience as the Company moved through the year. Many more commercial opportunities could have been exploited if the marketing arrangements had been properly planned and managed (paragraph 27).

      (v)  The risks in terms of visitor numbers were aggravated during implementation of the project in a number of ways, in particular:

  • the delay in completing the fit-out of the Dome meant there was limited opportunity for trial running, and when it opened there were operational difficulties;

  • the Company initially lacked senior staff with experience of running a large visitor attraction;

  • the effectiveness of marketing was constrained by uncertainty about the Dome's contents, so raising doubts about the value for money achieved from £40 million made available for marketing, advertising and communications;

  • initially, tickets were not available at the door, though, following the reversal of this decision, 20 per cent of tickets were sold in this way (paragraph 28).

On sponsorship

      (vi)  The financing of the Dome was heavily dependent on sponsorship income. After the lottery grant, sponsorship was the largest source of income for the project. However, the Company's forecast for sponsorship income was too ambitious. The Company raised only two thirds of its budgeted target of £175 million. This target was not soundly based: it did not reflect the uncertainty surrounding the contents of the Dome or the untested nature of the sponsorship market (paragraph 31).

On financial management

      (vii)  There was early evidence of the Company's financial problems, and cause for concern throughout the year 2000 about its solvency. But the full extent of the Company's financial difficulties, and therefore the extent of the further calls on public funds, was not crystallised and clearly quantified until August. The full lifetime costs were not identified before the project was approved, nor subsequently when discussing and appraising additional grants. The Company appears to have assumed that the extra money it needed would simply be made available on request, and not until late in the year of operation was any assessment made of the Company's costs through to closure (paragraph 46).

      (viii)  Although the Dome project was high-risk, with financial planning assumptions based on demanding targets set for visitor numbers and sponsorship, there was no clear plan of how the parties would respond to a shortfall in income. The Company failed to produce an exit strategy acceptable to the Commission, and the Commission's Accounting Officer twice sought and was directed by the Commissioners to award additional grants to the Company because he felt unable to defend those grants as representing value for money (paragraph 47).

      (ix)  The Company failed to establish a sufficiently robust regime of financial management. The Company's financial systems failed to cope with the volume of transactions generated in the run-up to the opening of the Dome. The Company's finance team was also over-stretched for most of the year, and the Company was slow to address this problem (paragraph 48).

On providing information to Parliament

      (x)  The circumstances in which Parliament should be notified of individual contingent liabilities are set out in "Government Accounting". The indemnity which the Department extended to the Directors of the Company in June 2000 represented such a liability, which also opened up for the first time the risk of voted money rather than lottery money being used in relation to the Dome project. In our view the indemnity was outside the normal course of business, and exposed the public purse to expenditure of such a nature and size that Parliament should have been notified, especially as the indemnity was a response to the Company's emerging financial difficulties and there was the real prospect of it being called (paragraph 55).

      (xi)  The Department and the Treasury did not see a need to report the indemnity to Parliament because they considered that an indemnity was already in place as a result of the Treasury Minute of December 1998 which permits non-departmental public bodies to offer indemnities to their directors as they are appointed. If that is so, we find it surprising that no reference to such an existing indemnity was made in the letter which the Department sent to the Directors (paragraph 56).

      (xii)  Changes in financial controls which properly rest with Parliament, but which Parliament has been content to see exercised by the Treasury, require the positive agreement of this Committee. The Treasury agreed to review the reporting arrangements with a view to issuing guidance on the categories of indemnities that should be reported separately to Parliament. It is important to ensure that indemnities are not treated as routine when they are issued or extended in response to anticipated financial difficulties, or where a significant risk of a major call on voted funds is known to exist (paragraph 57).

On the staff at the Dome

      (xiii)  Visitors to the Dome expressed a high level of satisfaction with the service provided by the Dome's staff, which was all the more commendable in view of the Dome's well publicised difficulties (paragraph 59).


8. The Dome has been built, fitted out and run by the New Millennium Experience Company (the Company). Lottery funding for the project has been provided by the Millennium Commission, and the Commission has received its funding from the National Lottery Distribution Fund.[4]

9. The formal responsibilities and accountabilities for the Dome at the time our predecessors took evidence are shown in Figure 1. The key elements of the arrangements which then applied, and the interaction between the various parties, are summarised below.

1    C&AG's Report, paras 6, 1.2, 1.30, 2.3 and Figure 11 on p38 Back

2    ibid, para 4 Back

3    C&AG's Report, The Millennium Dome, (HC 936, Session 1999-2000) Back

4   C&AG's Report, paras 4-5  Back

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