Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 104-119)


25 OCTOBER 2005

  Q104 Chairman: Good morning, Secretary of State. Can I particularly welcome you to the Committee this morning and the colleagues that you have brought with you. We are intending to kill two birds with one stone in this one session, in that the first half we are going to devote to our ongoing inquiry into preparations for 2012 and the Olympics and then, once we have completed that part, we will move on to carry out the scrutiny of the departmental report, which is something which the House attaches considerable importance to. Can I, obviously, welcome you and ask you (as well as asking you perhaps to just introduce the officials you have brought with you): in turning to the Olympics, we have now had, I understand, three meetings of the Olympics Board, which you Chair. Could you give us an update on the progress that has already been achieved and tell us something about what has happened as a result of those meetings, and indeed whether or not the minutes are going to be published?

  Tessa Jowell: Chairman, thank you very much indeed. I am delighted to be in here in front of the new Select Committee today. Perhaps I could just introduce my two fellow witnesses for this section (we will have a shift change when we move on to the departmental report). On my right is Matthew Symes, who has been seconded to my department from the Office for Government Commerce, and he is our Olympic Director. On my left is Nicola Roche, who is Director of Sport but also carrying a very heavy responsibility for Olympic development. Perhaps I can also say—and it part-answers your first question about the publication of the minutes of the Olympic Board—that it would be my intention to ensure that the Select Committee is kept as fully appraised as possible of the developing negotiations and the decisions as they develop in relation to the staging of the Games. You will understand, and we had the opportunity to have a brief word about this last night, that a number of these issues pass through a period of extreme commercial sensitivity and I would not want that to act as a barrier to the Select Committee being kept informed. So if you were happy for me to do this, we would seek to keep you updated at the appropriate time with negotiations, although those may not be, because of their commercial sensitivity, matters for public consumption. In the spirit of openness I hope certainly that we can share the decisions of the Olympic Board, the presumption being that the proceedings of the Board should be made available more widely, unless there is a very clear commercial or at least legal reason for not doing so.

  Q105  Chairman: I think that is very helpful. Obviously, if there are matters which you would prefer not to be made public at this time we would understand that. We would obviously appreciate it if you can tell us, if necessary in private, as much as you feel that you can.

  Tessa Jowell: Of course.

  Q106  Chairman: In terms of how the structure is going to operate, you are the Chairman of this overarching board. How involved are you going to get in the activities of the two bodies that you are overseeing, the LOCOG and the ODA? Are you intending to monitor closely the progress or is it, to some extent, just a body to oversee in a general way and to leave them to get on with it?

  Tessa Jowell: I jointly chair the Olympic Board, as per the terms of the Joint Venture Agreement, signed at the time that we submitted the candidate file to the IOC, with the Mayor of London. I, however, alone have the power to direct the Olympic Delivery Authority, which will be an NDPB, therefore at arm's length from my department, which is in the process of being recruited. I think there is a difference in terms of levels of engagement now and, probably, over the next six to nine months as compared to the levels of day-to-day engagement once the two bodies, the Olympic Delivery Authority and the London Organising Committee, are fully established and up and running. So my oversight is obviously to safeguard the Government's interest, the Government as the ultimate guarantor of the costs of the Games, but, also, to ensure that the Government plays its full part in ensuring that we have the most successful Games ever. To deal specifically with your question: how much will I be involved in the way in which the London Organising Committee runs, the London Organising Committee will be an independent body but represented on the Olympic Board. I will have a nominee, Richard Caborn, Sports Minister, on the London Organising Committee; in relation to the Olympic Delivery Authority I appoint the Olympic Delivery Authority. We are hoping that the Chair and Chief Executive will both be in post by the end of the year, at which point we can then begin the recruitment of members of the Board. I would not see it as my job to interfere or meddle with the work of the Olympic Delivery Authority. I hope that we will appoint people of the necessary calibre capable of delivering what will be one of the biggest construction projects this country has ever seen. We will appoint experts with a clear track record in delivering projects on that kind of scale. I hope that that gives you a sense of the way in which the relationships will be conducted. My oversight will, obviously, be through my co-chairmanship of the Olympic Board, which meets on a monthly basis and is very heavily engaged with the development of these two bodies. Also, however, in order that we remain ahead or at least on schedule in terms of procurement and development, we are at the moment engaged in decisions and tenders are being drawn up for major parts of the contract because we simply cannot wait until the ODA is fully established.

  Q107  Chairman: Inside government, obviously a huge number of departments are going to have to play a role in this—the ODPM, the Home Office, the Department for Transport etc. What is the structure in government? Is there a Cabinet Committee? If so, how often does it meet? Who chairs it?

  Tessa Jowell: At official level there is the Olympic Steering Group, which brings together the relevant representatives at official level and from across government. Obviously, the departments that we are working particularly closely with are ODPM (and we have had enormous support from the Deputy Prime Minister), the Department for Transport and, of course, the Treasury. Whitehall is fully represented on the steering group. We are also concerned, beyond Whitehall itself, to ensure that the devolved administrations are also involved. The Nations and Regions Group, which is to be reconstituted following the successful bid, will very much lead on that, but I can perhaps say a little bit more about the efforts that we are taking to ensure that the whole country benefits from the Olympics. The Cabinet Committee, MISC 25, brings together all the relevant ministers in order that they are also kept fully appraised and in a position to take decisions where there is an element of risk which has to be judged, and the Office for Government Commerce is played fully in, both to the operation of MISC 25 and, also, the day-to-day work of my department in setting this up.

  Q108  Chairman: Who chairs MISC 25?

  Tessa Jowell: The Foreign Secretary—and very well he does it too!

  Chairman: No doubt.

  Q109  Mr Evans: Secretary of State, for the Games to be a great success it is going to need some top sponsors and advertisers coming in. Have you taken a view or your department taken a view as to what sort of advertisers and sponsors you would like and, quite the reverse, the sort of sponsors that you may not like to take a dominant part in the Games?

  Tessa Jowell: I have commissioned some work on sponsorship precisely to ensure that we maximise the benefit of the enthusiasm that there is from the business community right across the country to be involved in the Games. The sponsorship rules are quite tightly drawn by the IOC, and I know that in your session with Keith Mills and Seb Coe you had the opportunity for some discussion about that. Our first and overriding objective is to ensure that the Local Organising Committee has the clear run that is necessary on sponsorship in order that it attracts the level of sponsorship income that it needs to meet the budget.

  Q110  Mr Evans: It is going to be hands-off, really, from the Department; it is going to be up to the Local Organising Committee to get the biggest buck it possibly can from advertisers and sponsors?

  Tessa Jowell: The Local Organising Committee will certainly want to get the biggest buck that it can, but the Olympic Board will also take an interest in the developing sponsorship strategy because while the LOCOG focus will be principally on securing sponsorship for the 17 days of the Games there is also a broader interest in attracting sponsors to support activity related to the Games—participation by young people, improving the elite performance of our best athletes, ensuring that the opportunities for the Olympics are shared round the country. So there is an interest in sponsorship which extends beyond just the role of the LOCOG in raising sponsorship for the Games. If you were to ask me what is the first priority for sponsorship, the first priority is to make sure that the LOCOG raises what is necessary. There is then a second objective, which is to maximise the benefits of sponsorship for a wider range of activities. I announced, for instance, at the end of September, that we were gong to establish a 2012 trust for young athletes. We are also looking for partnership with British Airways and other airlines to provide reduced price travel for young athletes travelling to other countries—all the time addressing the obstacles to our young athletes being the best that they can. This is very much a developing story, and I would be delighted to keep the Committee informed of our proposals for sponsorship as they become more developed.

  Q111  Mr Evans: I am just wondering if you notice any, perhaps, possible contradictions between government policy on things like obesity and getting young people fit and having a balanced diet and, on the other hand, having to raise substantial sums of money. Clearly the big multinational companies coming in with the big money may be ones like McDonalds, Burger King, alcohol groups—Interbrew—Coca-Cola, Pepsi Cola—which, as you know, have taken a bit of a battering of late from the media generally about their links to obesity. Are you going to even try and balance that or are you going to say, "Get on with it. People are adults, they see the advertising but that does not necessarily turn them into obese people"?

  Tessa Jowell: We are going to say "Get on with it. You raise the money from the sponsorship that the London Organising Committee need." I think Seb Coe, when he was in front of you, made it clear there would be no question of raising tobacco sponsorship. Beyond that, if we started to make judgments about which firms we would and would not accept sponsorship from, frankly, the face of sport in this country would be altered beyond recognition. There is a second limb of activity, which is getting these big companies, who—you are absolutely right—have tremendous corporate power behind what the Government and, I think more generally, parents in this country want to see, which is their children developing good eating habits, healthy eating habits, to be, if they put their minds and their promotional millions to it, great allies with us in that.

  Q112  Mr Sanders: Developing that point, there is a head of steam in Parliament for some sort of legislation restricting the advertising of certain foods to children. Who has supremacy in this? Is it the IOC? If they were to take on board the sponsorship from, say, one of those companies that, say, our Parliament has said should not be able to advertise to children—or is it our Government's line—is there a possibility of some conflict?

  Tessa Jowell: I think it is fairly unlikely that there would be conflict. If I can deal specifically with the way in which we are pursuing this policy domestically, the Public Health White Paper published before the last election set out the Government's position on food advertising to children, making it clear that it was for the regulator, Ofcom, to come forward with proposals for a new code that will govern the behaviour of advertisers. Obviously, if a code applies in this country we would expect that code to apply whatever the circumstances. The Committee will be familiar with the argument that the Government has followed through on this, Ofcom on the Government's behalf, examining very carefully the case for an outright ban, and that case being tested against the evidence and the extent of harm caused by advertising in the generation of obesity among young people. The conclusion of the Ofcom and the Food Standards Agency research was that food advertising had an impact but it was an impact that it was impossible to quantify. We are very much, and we have a PSA target which we share with DfES and with Health in relation to childhood obesity, investing our effort in increasing the amount of exercise young people take and improving the quality of their diet. Advertising, obviously, has a part to play but we will not make progress on obesity, which is of course the objective behind all these policies, if we simply relied on a restriction on television advertising for food.

  Q113  Mr Sanders: I accept that point but were a Parliament, not necessarily the present one or future Parliaments, to pass restrictive rules on advertising that would impact on the sponsorship and advertising deals that the IOC has agreed, who would actually resolve that dispute?

  Tessa Jowell: You are giving me a hypothetical question.

  Q114  Mr Sanders: I know.

  Tessa Jowell: It is a question that in all honesty I do not expect to arise, but it would be settled through the decision-making process that we have established for the Olympics; it is a decision that would be taken by the Olympic Board, but obviously there would have to be discussion with the IOC and so forth.

  Q115  Mr Sanders: Surely our Parliament is supreme.

  Tessa Jowell: I was going to make the point that the laws of our country are supreme and so we would not have the Olympic Games in a position where they were breaking the laws of our country. The IOC is familiar with this kind of territory and there are, at the moment, negotiations under way with countries in the context of the Winter Olympics who have different rules and different penalties in relation to athletes taking drugs. This would have to be negotiated if the hypothetical circumstances that you outline were to arise, but the principle would be that the law of our country would be supreme.

  Q116  Janet Anderson: Secretary of State, as the ODA will be entering into substantial contracts, I am sure you will be aware that many people have sought assurances that local and UK companies will be involved. I understand what you said earlier about commercial sensitivity and also not meddling in the work of the ODA but is there any way within the confines of procurement laws that you can ensure that local and UK firms will benefit?

  Tessa Jowell: I am going to ask Matthew Symes to answer this, but I would just say initially that it is our intention that companies across the UK should benefit. The latest estimate that I saw was that there would be something like 550 contracts that would be let in the course of the Olympics. They do, of course, have to be let in accordance with European procurement rules and they are almost all likely to be of a size that would require that. As part of our intention to maximise the extent to which the benefits are spread throughout the country we will be in discussion with Regional Development Agencies in order to encourage them all to develop Olympic business plans so that they can build on what I think the North West Regional Development Agency felt that it was quite successful in doing, but might have done even more, in maximising the benefits of tourism, inward investment and so forth. So it is our aim to make sure that the whole country benefits, it is our aim to ensure that the Olympic area—which is, after all, one of the most deprived parts of the country and the most deprived part of London—benefits and that the Games leave a legacy which is not just a legacy in terms of infrastructure but also a legacy in terms of higher levels of employment in that part of London and a more highly skilled population than is the case at the moment. Matthew, can I ask you to set out specifically the rules that we will follow in relation to procurement?

  Mr Symes: Thank you, Minister. This is of interest, obviously, to the policies that are being set by the ODA, and one of the criteria within the award contract will be an assessment of the local employment or the national employment. That is one of the things we are looking at when contracts come forward. This has happened already in the first award. So that thinking is very much in the culture now of the interim teams and we are going to make sure it is in the culture of the ODA when that is brought to life. I also know, in parallel, that the Mayor is extremely interested in this, obviously, as there are four boroughs directly affected, and he is taking steps to make it easy for small businesses to engage with these bigger processes to make sure they get involved at the right time and have a mechanism to come forward. Those are the sort of practical steps.

  Q117  Chairman: Secretary of State, can I just move on to the question of the financing? You have obviously stressed that you are confident that the budget figures have been reached after a great deal of analysis and the danger of a cost overrun is small. However, when we looked at the experience of other host cities there have obviously been significant cost overruns, and there is provision made as to what should happen in that event. There is a feeling, I think, that whilst London is rightly going to have to contribute a significant amount of the cost, it is perhaps unfair that the liability of London should be open-ended; the Olympics should benefit a large amount of the country, hopefully right across the UK, and yet London appears to be expected to pick up most of the bill. Is that something which you recognise, and do you not think that in the event of a cost overrun, perhaps, the Government should take responsibility rather than expecting London council taxpayers to do so?

  Tessa Jowell: The first thing, I think, to be clear about is that in line with the IOC's requirements the Government is the guarantor and, therefore, is the lender of last resort and underwrites all the cost. However, because of the decisions that have been taken in Government and extensively debated, I think, it is our intention that the public sector contribution should be met through three sources: from the Lottery, from the London council taxpayer and from the LDA. If I can just help the Committee, I think it is useful to see Olympic expenditure in three elements, and this clarifies the nature of what are often described as cost overruns. There are the costs of staging the Games and, by and large, the recent experience of the Olympics has shown that the Games either break even or they make a small profit and that profit is then ploughed back into sport in the host country. There is then the second tranche of expenditure which is the money spent on building the infrastructure, the £2.375 billion, and then there is a third category of expenditure, which I would describe as essential but non-Olympic infrastructure. Where expenditure is often described as being a cost overrun is in that third category. Sydney, for instance, regenerated a major part of the city, upgraded its public transport infrastructure, which created a lasting non-Olympic benefit but actually hosting the Olympic Games was a catalyst—similarly Athens, similarly Beijing. So I think it helps to look at expenditure in those three categories. The category of particular relevance to your question is the central one, which is the £2.375 billion, which is the cost to which the London council taxpayer contributes. I can confirm again the rigour that we are applying to the costs in order that they are contained within that overall expenditure limit. Because of that, we are able to say that we expect the consequence, as the Mayor has said on a number of occasions, or the effect for the London council taxpayer for a Band D home to be about £20 a year over a 10-year period. There is in the Memorandum of Understanding between the Government and the Mayor an agreement (which is as yet not defined because those circumstances have not arisen) whereby what should happen if the £2.375 billion figure were to be exceeded, and, as I say, at every stage we will be seeking to value-engineer any increase in costs down. That is our overriding objective. However, we have provision for a formula of cost-sharing between the Mayor and the Lottery should those circumstances arise. So what I cannot say is that we are guaranteeing that there will be a cap, but what I can say is that there is daily vigilance on monitoring the costs and taking all reasonable steps available to contain those costs within the figure that we submitted in the candidate file.

  Q118  Chairman: But you do not accept that there should be any limit placed on the potential liability? There is no point at which you would say the Government will step in to pick up any additional cost?

  Tessa Jowell: No, I do not. That is not the decision that the Government has taken; the decision that the Government has taken is to underwrite the cost but then to raise the costs from the council tax and from the Lottery, together, obviously, also, with the costs which are being met by the LDA, and the money that the LDA spends is Exchequer money.

  Q119  Chairman: There is a reference in the Memorandum of Understanding to a review taking place in the summer of 2005. Has that happened or is it an ongoing process?

  Tessa Jowell: This will be an ongoing process.

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