Examination of Witnesses (Questions 1-19)
LORD COE
AND MR
KEITH MILLS
18 OCTOBER 2005
Q1 Chairman: Good morning, everybody.
This is the first of what I suspect will be a pretty regular session
where we monitor the preparation of the London Olympics. It is
really the beginning of what I suspect will be a seven-year inquiry.
May I first welcome particularly Lord Coe and Keith Mills from
the London 2012 Organising Committee? I think the whole committee
would like me, right at the start, once again to congratulate
you both and all your team on what was an absolutely magnificent
achievement. The fact that we are able to hold this inquiry for
the next seven years is fantastic. We look forward to it. May
I begin by asking you this? Lord Coe, you set a pretty demanding
programme for your first 100 days, which are just about up now.
Can you tell us what progress has been made? You started off obviously
with interim staff. How are you getting on with recruiting a chief
executive and recruiting permanent members of your team? Are you
looking to employ people from other countries as well who have
had experience of running previous Olympic Games?
Lord Coe: For a moment, for the
convenience of the Committee, may I introduce my immediate team,
although not everybody in this room. I think you will be speaking
to Keith Mills, Deputy Chairman, during the course of the day.
Sitting directly behind me are Mike Lee, our Director of Communications,
and John Armstrong, whose aunt I think is known to a number of
your committee colleagues, who is one of our political liaison
officers. May I immediately echo our thanks. This is the third
time that we have been before a CMS select committee: as an applicant
city, as a candidate city, and now obviously delighted as a host
city. May I thank not only your committee but the cross-party
approach that gave us such an important platform in Singapore?
It was a very important message that the political leadership
of the UK was on board and strengthened our case. We have set
a pretty busy target for ourselves over the first 100 days. It
was very important during the bid phase, and particularly in Singapore,
to be able to demonstrate immediately to the International Olympic
Committee that we not only had the first 100 days mapped out and
we had a transitional team in place but that we were very aware
that other cities had experienced difficulties in the initial
implementation phase simply because there were things throughout
the bid phase that were not nailed down, like finance planning
and land acquisition. We have started the process of the trawl
for a chief executive. Keith and I spent much of yesterday on
that business. We hope that we will be able to make an announcement
by Christmas, with an appointment in place probably in spring
time, perhaps a little earlier than that. These are fairly open-ended
issues. This is an international trawl. Frankly, this whole project
will be managed by people of the highest ability from wherever
they come. The Olympic Delivery Authority is the heavy-lifting
arm of this whole project. We are the theatre producers, if you
like, as the local organising committee. As you know, the Bill
is currently in passage through both Houses and I think at committee
stage this morning. The whole process, even the grounding of overhead
power cables on the Olympic site, has started. We are up and running.
It was very important that that was something we were able to
demonstrate very quickly off the back of Singapore.
Q2 Helen Southworth: We will be taking
evidence later from VisitBritain and Visit London. What role do
you think they are going to have in the preparations for the Olympics?
In particular, would you want representatives from these organisations
to sit on the LOCOG's Board?
Lord Coe: I will be very open
about this. This is a multi-dimensional project. As the Chairman
quite rightly pointed out, this is a seven-year process. The partnership
that bore so much fruit throughout the bid phase and allowed us
to present the strongest of cases, not only on behalf of British
sport but as to some of the economic benefits, particularly tourism,
the showcasing of London and widening that project to a UK-wide
dimension, was very important. London is very important. We will
be working very closely with all the tourist authorities throughout
the length and breadth of the country to make sure that all these
benefits are accrued. Again for the convenience of the committee,
we take the UK-wide aspect of this very seriously. We made the
point very early on that the Games are inevitably based in one
city but that this is a UK-wide project. We have in place now,
with the first meeting on 4 November, a Nations and Regions Group
chaired by Charles Allen. That is really the vehicle that will
broaden throughout the UK. The benefits will, for instance, produce
a co-ordinated approach to bring the teams to preparation camps
in the UK. Before the Games in 2000, 139 countries based themselves
in Australia, a serious contribution not only to the local but
also to the national economy. All these groups will be represented
within our structures and they play an important role.
Q3 Helen Southworth: One of the strengths
of the bid was the concept of inspiration for young people in
particular. Is that going to be a strong focus? Bringing families
along to experience, participate and catch the spirit is going
to need facilitators.
Lord Coe: Absolutely, and part
of our narrative in Singapore was that these were Games for the
next generation. We best expressed that on the day of the presentation
by taking 30 children from East London, an area that will be most
affected by the Games. It was a central theme in our narrative
and we want to deliver on that. We want to maximise opportunity
for young people, whether it be in sport or the cultural programmes
that will inevitably develop alongside the educational programmes
as well.
Q4 Adam Price: Could I return to
the role of the chief executive? The Times was quoted as
saying that the advertisement for the role of chief executive
specified ruthlessness as a desirable trait. Do you think civil
servants should be ruthless?
Lord Coe: First of all, I am not
sure that The Times did actually use the word "ruthless".
Certainly the advertisement did not contain the word "ruthless".
It is important to point out that the chief executive is actually
not a civil servant. This is an organisation that derives the
bulk of its funding, 96 to 97% of it, from the private sector.
This will be a chief executive appointed on very strict commercial
lines. The interface between the International Olympic Committee
and this whole project is through the local organising committee,
through the Chairman, Chief Executive and Deputy Chairman, as
Keith will be when we get into the complete structure. I think
the comparison between him and a civil servant would probably
not be that accurate.
Mr Mills: I think the advertisement
you refer to in The Times was for the chief executive of
the ODA, the Olympic Delivery Authority, not the local group.
Perhaps this would be helpful to the committee. I presume you
do understand the relative roles of the two organisations. It
is very important that they work very closely together. Indeed,
we will be co-located in one building, but they are very different.
One is spending public money on building infrastructure; the other
is privately financed and organising the Games. It is important
to understand that there is a big difference between the two.
Q5 Adam Price: So the advert for
the chief executive of the ODA did use the word "ruthless"?
Mr Mills: As far as I am aware,
it did, yes.
Q6 Paul Farrelly: It is not only
great that the International Olympic Committee has had the faith
to award a major sporting event like that to Britain, given some
of the mishaps in the past, but it is also good to see that the
committee is praising the start that has been made. In your terms,
in the start you have made, what are the key lessons that you
have sought to learn from previous Olympics, such as Athens, Sydney
and Barcelona, and what are the key mistakes you have sought to
avoid?
Lord Coe: I think we needed to
demonstrate to the International Olympic Committee that this is
not a seamless process. Anybody who sits in front of an Olympic
Committee and tells them that the Games are a risk-free project
is likely to be laughed out of court for their naivety. I think
what we did demonstrate was that we understood some of the risk
areas and we dealt with those, as I mentioned in my opening remarks,
throughout the bid process. There was the need to have the funding
package in place, guaranteed and with political support across
the board, and the ability, as we had, to get outline planning
permission for 500 acres of prime site in London in six months.
It may just be that one of the legacies already was being able
to move the planning process quite as quickly and with such a
partnership really was effective. We had the bulk of the land
acquisition in place and the ability to start work the next day,
The transitional teams were in place, we understood where a lot
of those areas of risk were and we were able if not entirely to
eradicate them, to minimise them throughout that process.
Mr Mills: That is summed up as
a fast start. You need all seven years efficiently to manage an
Olympic Games; to build an Olympic Games' infrastructure; to have
a very clear organisation that ensures everyone is clear about
their roles and responsibilities; and to get the finance in place.
In the case of Athens, there was a large delay of two or three
years after they won the Games in determining what the organisation
was going to be, where the money was going to come from and, as
a result, it cost Athens a lot more than it should have done.
We have made a very fast start. We have a very clear structure
in place. We have the finance in place. We intend to run the London
2012 Organising Committee in the same way as we ran the bid, which
was on time and on budget. This afternoon I will be reporting
to the Olympic Board that during the bid phase we came in under-budget
and we will be returning £1.4 million back. Obviously we
have had a successful outcome. We remain focused on what we can
do in 2012.
Q7 Paul Farrelly: We all saw the
race against time in Athens and things being lifted and roofs
being left off or put on at the last minute. In terms of the models
of organisation from the Olympics that you have seen, which is
the best model to follow? Which are the best organised Olympic
Games, as far as you are concerned?
Lord Coe: In a way, it is very
difficult to compare models because all Games are so different
in their nature. For Athens, no city probably in the modern era,
certainly not since 1952 with Helsinki, has had to come from such
a long way back in roads, rails and metro systems. Also, we are
a long way ahead if you consider some of the cost difficulties
Athens had setting up its security structures. I think probably
for odd reasons the answer is Los Angeles in 1984, which had to
do so much in a completely different environment, one that was
not at that stage very conducive to bidding, and not that many
cities wanted the Games. It became a very different story a few
years later. Los Angeles introduced a number of marketing and
merchandising opportunities. Volunteers were reintroduced to the
Olympic scene. In 1948, London actually introduced the concept
of volunteers. I suppose, if you look at recent structures, my
answer is probably Sydney. We have leant quite heavily on some
of their structures, certainly the relationships between the local
organising committee and the political structures. In the bid
phase, we had some consultancy help from the chief operating officer
at the Sydney Games who supplemented the enhanced team and gave
us some quite helpful steers that have put us in a good position.
Q8 Paul Farrelly: They both made
money?
Lord Coe: Yes.
Q9 Paul Farrelly: Having made such
a good start, what are the key priorities now for the next 12
months? Where do you want to be in 12-months' time when you come
back to this committee again in this seven-year inquiry?
Mr Mills: I hope it is not going
to be a seven-year inquiry! That would be very unfortunate. We
would be very happy to come back and report to you on a regular
basis on our progress. It is very important that the ODA becomes
faster. It is important that this Bill gets through Parliament
efficiently and quickly because the faster we can get that in
place, the faster we can get on with the Olympic part. We are
talking about an extremely complex project. I think the last time
I looked there were 8,500 items on a Gant chart. This is a very
complex organisation. It is really important that in the next
12 months the ODA is up and running as quickly as possible; the
land acquisition is as advanced as possible; and a lot of the
major infrastructure is in place. That has already started and
the electrical cables and some of the steel work and the stuff
you do not see under the ground are already happening. Quite separately,
the most important thing then is the building of the two organisations.
An Olympic Games is as good as the people who run it. Finding
a really good senior both for the ODA and for LOCOG is critical
and for those individuals to start building their teams. In LOCOG
we have between 60 and 70 individuals, and that figure is growing
by the week. This is an organisation that will grow to 2,500 people
by 2012. It will be as successful as the foundations we build
over these next 12 months. The accommodation of people and a fast
start for the ODA are probably the two highest priorities. There
are two other projects that will kick off and be very important
next year. One is the launch of a new identity for the Games.
That is something that each of the organising committees of an
Olympic Games does, usually in the first year or two. We think
it is important that is done sooner rather than later. Towards
the back end of next year, you can expect a new identity for the
Games. Secondly, we will start, indeed have already started and
we are in the early stages, to have discussions with the major
corporate sponsors, which will fund a large element of the LOCOG
costs.
Lord Coe: Those are all absolutely
essential. There is also the continued successful relationships
between the key stakeholders (and many of them will be speaking
today), our ability to be transparent and open with people about
what we are doing, and the timelines and management of expectations.
Communities are not going to wake up in the next two years to
nine new venues and Olympic parks. This is a long process and
managing expectations but keeping people engaged and enthused
and understanding this process is a key part of the communications
remit within both the organisations.
Q10 Mr Sanders: May I go back to
what Keith Mills said about sponsors? Do you have an unfettered
right to choose your sponsors?
Lord Coe: There are some key controlling
influences. We are charged with putting together what we call
the local sponsorship. That local sponsorship cannot be at variance
with the International Olympic Committee's top sponsors, the key
10 companies such as McDonalds, Visa, Samson's, and Panasonic.
So we have to work within the category framework. Those revenues
come on-stream in 2008-09. Our task is to match at local level
that type of sponsorship which, as I have said, is not at variance
and it is not unfettered, but we will be looking at clear categories.
We want to make sure that the success of our ability to bring
in sponsors and partners at all levels is recognised, at the end
of the day, in what we can redistribute amongst the hard-pressed
communities in sport.
Q11 Mr Sanders: Will you apply any
rules to the kinds of sponsors that you would want on board? For
example, would you want to be sponsored by an organisation that
might be associated with unhealthy eating or binge drinking or
some sort of anti-social behaviour, or would you apply a sort
of quality test to the sponsors, or is it just an open market
because you need as much sponsorship as possible?
Lord Coe: No, it is not an open
market. For instance, we would not be using tobacco as a sponsor
but most of the other categories we would judge on their own merits.
We do not have a fixed framework at the moment. We will look at
them. It is not an open market. As anyone in the sponsorship market
will tell you, the synergy of sponsorship is very important. Where
you take from today ultimately determines where you take from
in six or seven years' time. We would like the key sponsorships
in place before Beijing. This will be done in a pattern. As Keith
has already said, we are putting together our own structure to
deal with that. We will be appointing a senior marketing team
to supplement the existing structures that we have. That is a
very important part of it.
Mr Mills: To give you some idea
of the categories we will be focusing on to start with, those
will include the following sectors: banking, telecommunications,
automotive and insurance. These sectors are available to us in
the UK for local sponsorship. Based on previous Games, those will
generate the largest financial commitments.
Q12 Janet Anderson: Staying with
funding, you are predicting a £100 million operating surplus.
Could you tell us how and by whom your anticipated income has
been compiled? Do you have a breakdown of how this will be spent?
Bearing in mind that your funding streams are going to take some
time to come through, what will you do in the meantime? Is it
possible to borrow from the Government on the basis that some
of your profits will be re-invested in British sport?
Lord Coe: The very nature of the
local organising committee means that we have gone into the marketplace.
We have our own London Organising Committee funding in place.
We did a deal recently with a commercial bank. That is on a simple
draw-down basis; it is borrowed against future business. There
will not be any requirement within the local organising committee
to go to the public purse, but we have very clear timelines, as
Keith has already said, about the categories and how and when
we want to bring them on board. The overall structure will be
developed and is being developed currently. We will have that
in place in a few months' time. Already, very good conversations
are taking place right across the board.
Q13 Janet Anderson: Do you have a
breakdown of that?
Mr Mills: I would refer you to
the candidate files that are in the library for a detailed breakdown.
In simple terms, we get a large grant from the IOC. We generate
substantial local sponsorship revenues. We generate substantial
revenues from ticketing and substantial revenues from merchandising
and other forms of sales promotion. Those are the major streams
of income. The 2012 prices are not the prices you will see in
the candidate file because they were done in 2004. The 2004 price
is around £1.5 billion; at 2012, it is close to £2 billion
of revenue that will be generated. Our expectation is that we
will have a surplus on those revenues of £100 million or
more.
Lord Coe: That is a rough 60:20:20
distribution—British Sport, British Olympic Association,
IOC—in terms of surplus.
Q14 Janet Anderson: When do you expect
to get the contribution from the IOC?
Mr Mills: Some time after 2008.
Lord Coe: It is phased for half-way
through.
Q15 Chairman: Where do broadcasting
rights come in?
Mr Mills: They come in to the
IOC.
Q16 Chairman: And you do not benefit?
Mr Mills: We do indirectly. They
are sold as packages across more than one Games. They sell them
sometimes in eight- and twelve-year packages and then they are
distributed to the organising committees of Beijing, Vancouver
and now London.
Lord Coe: Those discussions are
underway now with the International Olympic Committee.
Q17 Mr Evans: You hope to make a
profit of £100 million. How confident are you that you will
be able to achieve that? I have looked at some of the figures.
Everybody thinks Sydney was a great Games but it was not a great
financial success to them; they broke even. Poor old Montreal,
they are only now finishing paying off the enormous debt that
they built up there. How confident are you? What sorts of things
are you going to do differently that will make you all this money?
Lord Coe: I think our overall
estimate of surplus is quite conservative—with a small "c",
I hasten to add. For working purposes, we have always been conservative
enough to think this was a breakeven figure. I do not have any
doubt at all. You ask about Montreal. That was an accounting issue
as much as anything. The issue for us is that we are a well-established,
well-defined, mature market for sport as a country. We think that
these figures are certainly do-able. To be honest, certainly in
terms of the initial sponsorships, it would be quite nice to be
able to buck the trend at that stage in our seven-year development.
Yes, we are confident about that.
Mr Mills: It might be worth adding
that the response we have had since July 6 from the corporate
sector in terms of their interest in sporting events is extremely
high, so we are optimistic.
Q18 Mr Evans: Of course we were all
delighted with July 6 and then we had July 7. One of the costs
now that you are going to have to anticipate is the huge extra
security that will be involved with these Olympic Games, probably
the most that will be spent on security that has ever been spent
at any Olympics. Is that all going to come from within that budget?
Lord Coe: July 7 was a pretty
awful day for everybody. We will review regularly and we will
keep under constant review the 17 themes in the candidates' file.
Our security plans are robust and they were robust. They were
highly commended recently at the end of the evaluation phase in
this whole process. The one advantage we have in London, of course,
and more broadly in the UK, is that we have the intelligence structures
in place; we have a very well-developed approach to policing.
If you look at Athens and Sydney and at other sporting events,
there has hardly been a sporting event anywhere in the world in
the last 10 to 15 years that has not had British policing or some
of our security advice at its heart. The unofficial security team
in Athens was run by Sir David Veness, a former deputy commissioner
in the Met; in Sydney, it was Peter Ryan, a former chief constable
in Thames Valley. We are pretty comfortable about that. We think
the budget is robust. You are right that security underpins everything
we do. That will be the prerequisite. Within the structure, we
have the Olympic Security Committee chaired by the Home Secretary
with complete and at all times unfettered access to everything
we are doing. The Head of security on the local organising committee
will sit on that committee.
Q19 Mr Evans: Are you responsible
for the cost of all the security within the Games or is the Government
going to pick up the tab for that?
Lord Coe: Within our own budget,
we have set aside a specific security budget and a targeted budget
for specific venue security. The broader issue of policing and
all the other stuff, of course, does not reside within the local
budget.
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