Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 140-159)



  140. Somebody did tell you, "You must not do that."
  (Mr Hall) From the Corporation's point of view, if it had been stated—and it is not my understanding that it was stated—you should not do something, you do not do it. It is straightforward. So the issue there surely would have been in terms of audit there would have been very, very severe qualifications in the audit report and in the management letters of the audit saying, "That stops, that stops, that stops because you are breaching that guidance."

  141. Who signed those accounts?
  (Mr Hall) PW.

  142. No, that is the auditor. Who signed the accounts.
  (Mr Hall) I did, the Chairman did.

  143. Yet you are surprised you were receiving fully audited accounts.
  (Mr Hall) The implication of that statement is that it was simply the accounts of the Corporation. They were sent in their draft form to the Department, they were approved by the Department, and they were signed off by the Department.

  144. Sir Richard, paragraph 2.10 says, "The Department told us that it had interpreted Treasury guidance as permitting such anticipation of grant." This is the anticipation for future years. Why was that your interpretation?
  (Sir Richard Mottram) It was quite clear from the then guidance that you could anticipate monies which had already been voted by Parliament. The rule was, roughly speaking, if you knew at the end of the financial year, or if you knew by the time you signed off the accounts in relation to the end of the previous financial year, that you could confidently rely on that money, you could take it into account in the accounts. That was the guidance at the time. What I think is clear from this is that the Department was sanctioning a practice which went beyond anything consistent with the then guidance, so the Department was sanctioning more sums being taken into account than was appropriate in relation to the then guidance. The point is, anticipation was not ruled out, the rate at which eventually this process was going on was not really consistent with the guidance.

  145. So why did the Department make that interpretation then?
  (Sir Richard Mottram) I think it got it wrong, to be honest.

  146. Who got it wrong? The same people you have already listed?
  (Sir Richard Mottram) I suppose so, yes.

  147. Paragraph 2.21says, "The Government Office [of the North East] was concerned that the Corporation's lack of cash would be reported in the media . . .". Was that the main concern of the Government Office of the North East, how these things were perceived in the media?
  (Sir Richard Mottram) I am not sure it was not, but the point was this was a classic confidence issue. If it was implied that the Corporation could not settle its debts, then, as we know in relation to other contexts, that can rapidly erode confidence. That is the point.

  148. Would you give a similar answer to Case A on page 20 where it talks about this £8.4 million project of the University of Durham Stockton Campus? The Department's original view was, "The regeneration benefits had not been substantiated and the quantifiable outputs delivered poor value for money; the educational need had not been clearly demonstrated; the Corporation was heavily committed . . .", it then says, "The Department reversed its decision in the light of the potential effect that any loss of confidence in the Corporation would have on other projects . . .". Is that a good way of spending £7.4 million of public money? On a project which is not regarded as value for money, ie a complete waste of public money? It was spent solely because you wanted to maintain the confidence this Teesside Corporation had in the area.
  (Sir Richard Mottram) I think there is a difference between something having no value and being poor value for money, if I can draw that distinction. As the Report clearly states, yes, the Department did take that view because of the issue of confidence.

  149. It does seem a rather expensive sum of money to spend on confidence.
  (Sir Richard Mottram) As I say, it no doubt had value, but it did not have enough.

  150. Mr Hall, Case D on page 21, the Tall Ships Centre. It says, "The Government Office took the view that the Corporation had divided the scheme into smaller elements, to bring them below the threshold for Departmental approval, and expressed concern to the Board that the Department's rules had been circumvented in this way." Is that correct?
  (Mr Hall) That the Corporation did split the scheme deliberately on that basis?

  151. It did?
  (Mr Hall) Is that the question?

  152. I am asking, is it correct what it says in the Report?
  (Mr Hall) I am not convinced it is correct but I am obviously not privy to the papers.

  153. Why was this scheme divided up?
  (Mr Hall) I believe there were two different elements to a scheme. That was the reason in fiscal terms why the scheme was broken down. But I am talking without access to papers six or eight years later.

  154. How come the NAO has these details. Why have they written this?
  (Mr Hall) I am not querying what the NAO is saying. It says here—I am sorry.

  Chairman: Do you want to think about that answer? You can come back later on. Go on to your next question, Mr Gibb.

  155. It is a bit difficult without answers. Page 23, why was no approval sought with the Department about this gift to the University of Durham Stockton Campus? It says in the Report, "We found no evidence that the Department either knew about, or approved, this gift."
  (Mr Hall) I have not got a full answer to that again given the circumstances I am in.

  156. What circumstances are you in? Why can you not answer these questions?
  (Mr Hall) Basically, it is four years after I finished work. Obviously I have not got the papers and the files or the support staff that I had four years ago. So I am trying, as I did with the NAO, to give the best answers I can in relation to the points which are raised.

  157. So you cannot remember is your answer. That was also the answer to the previous question, you cannot remember. Case D then. Why was this property sold at such an under-value, £1 million instead of £2.7 million? Is it the same answer?
  (Mr Hall) No, it is not the same answer. The situation which arises in relation to Case D is quite simply that a valuer made a decision in March 1998, and you have a DV valuation some four years later. The fundamental point from my point of view, as I said earlier in this hearing, is that the Corporation obtained valuation certificates and it achieved on a competing basis the valuation certificate for the sale of that land at £1 million.

  158. Can I ask you about Case B then, Middlesbrough Football Club. Did you instruct the surveyors to value the site as contaminated and unreclaimed notwithstanding the fact it had been decontaminated and reclaimed?
  (Mr Hall) Yes.

  159. Why did you do that?
  (Mr Hall) Because that goes back, as I tried to explain before, to the situation which I do not have all the detail of, when we entered into a leasehold arrangement with the Football Club in around 1995, I think, and it was implicit for whatever reason in that negotiation that we would go back to a freehold arrangement with the Football Club, therefore you are looking at a situation on its original basis as opposed to when the reclamation had been done. Part of the rationale for that statement is, if you look at it this way, the stadium is being built, the inherent value in the site is coming from the stadium, in other words you are building in your own value, so you have to go back to before it was built.

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