Examination of Witnesses (Questions 260
- 279)
TUESDAY 15 JANUARY 2008
MR NEALE
COLEMAN AND
MR MANNY
LEWIS
Q260 Chairman:
Do you have a total, a ballpark figure of how much it has cost
to compensate businesses?
Mr Lewis: Our overall land assembly
figure is £1.1 billion, of which the actual land acquisition
is £650 million plus fees, plus interest on our borrowing.
That is the range. The remainder of that budget comprises the
remediation costs of about £220 million. The LDA's contribution
to the public sector funding package is £250 million.
Q261 Chairman:
If you take those three figures, the difference between them and
£1.1 billion is going to be how much you will have paid?
Mr Lewis: No, you cannot extrapolate
it like that, because there are other ancillary costs. We would
have to give you an itemised report on that, Chairman.[3]
Chairman: If you could do that that would
be helpful.
Q262 Mr Hall:
Could I address the issue of the public funding package. In the
initial Memorandum on the funding of the Games the Mayor was committed
to paying £625 million towards the Games, and in the revised
Memorandum agreed in June of last year that has gone up by £300
million. He said he is not going to put the Council Tax up or
increase bus fares so how is he going to find £300 million?
Mr Coleman: What we will be doing
there is essentially factoring the need to make that additional
payment into the overall financial strategy that the LDA has.
That strategy for funding the total cost to the GLA group of the
Games is met by both payments from grant from the LDA, and by
capital receipts coming in after the Games. In order to match
the actual money that we need for the time when it is needed,
the LDA has a borrowing programme in place. Effectively what is
happening here in order to meet that additional £300 million
is that it is being included in the overall package being funded
by borrowing as necessary, to be met either by government grant
to the LDA or by the capital receipts coming in after the Games.
Q263 Mr Hall:
So the Mayor does not have to spend any extra money then?
Mr Coleman: Obviously he has not
had to raise any additional money from the Council Tax and fares.
There will obviously be consequences in that the fact we are meeting
that money in this way will mean that other LDA programmes which
perhaps could have been carried out over what is quite a long
period of time (it is a 20-year borrowing period) will not be
able to be carried out because the first call on that will be
the money that is necessary to meet this additional £300
million.
Q264 Mr Hall:
Is the Government aware that the Mayor may be expecting the Government
to provide additional grant aid to meet this £300 million?
Mr Coleman: We are not expecting
additional grant aid. This is based on assumptions about the normal
level of grant aid that we would expect in any event from the
Government. We are not looking for additional grant from the Government
for this. As I say, we have a package—a financial strategy
the LDA has developed—which includes taking account of the
grant it would normally expect to receive in the normal course
of business; and taking account of borrowing that it will make
and will repay over a 20-year period. There is a real cost obviously
involved in this because, as I say, it will involve over the lifetime
of this period other things that would have been done in London
not happening.
Q265 Mr Hall:
Did I hear you correctly say you also would look to raise money
from land sales after the Olympics?
Mr Coleman: Yes.
Q266 Mr Hall:
Is that not already in the package, raising money from the sale
of the land afterwards? You are not double-counting this, are
you?
Mr Coleman: No, I assure you,
we are not double-counting. This is a matter which has been gone
through in detail by the LDA, and Manny can add to what I say.
What we have done is take account of the need to repay all borrowings
that the LDA will have had to incur in order that it can meet
the various obligations that it has to contribute to the Olympics—whether
that has been for the acquisition of land, the existing £250
million contribution, or the £300 million additional contribution.
Q267 Mr Hall:
Can I question you now on the contingency because the Mayor of
London said a 20% contingency is probably upper limit; the Olympic
Delivery Authority said 30%; and the Treasury have said 60%. Is
the Mayor of London now persuaded that the 60% is the right level
of contingency?
Mr Coleman: I think the position
now really is, first of all, to say that everybody who is involved
in the Games and on the Board has agreed and endorsed the funding
package in the budget as it stands now, including the 60% contingency.
I do not think the Mayor has departed from his view, but he does
not want to see anything like that full level of contingency spent
or utilised; which was really the basis for his original view
that he did not believe so substantial a contingency as has now
been in effect agreed was necessary. On the other hand, the Government
has made clear in discussions that it wants to take an extremely
prudent approach to this, and that is the budget which has been
reported to the Olympic Board which everyone is now content to
work with. I know that the Mayor will certainly continue to press
everyone involved in delivery very strongly that that contingency
amount should not be fully drawn on, and that costs should continue
to be driven down at every opportunity.
Q268 Mr Hall:
Mr Lewis, could I now just take you onto the £250 million
the LDA is going to contribute to the Olympic Delivery Authority.
Is that going to be linked to any particular purpose for the Games?
Mr Lewis: No, there is no earmarking
of that sum. We are obliged under the Funding Package to make
a contribution of £250 million and that will be through £50
million tranches between 2008 and 2013, but there is no earmarking.
In our negotiation with the ODA, obviously we have said we expect
that to be spent on London development related to the Olympics,
because it is funding from the London Development Agency, and
they are supporting that approach.
Q269 Mr Hall:
Do you foresee at this stage that you may have to vary the times
the money is drawn down or the amounts paid, or are you happy
with the current arrangements?
Mr Lewis: We are happy with the
current schedule. The agreement does give the opportunity to vary
in discussions with the relevant parties; but actually, as Neale
Coleman has said, we have factored that pattern of commitment
into our funding strategy and we are confident with it.
Q270 Philip Davies:
Can I just clarify what you said in answer to Mike Hall about
this £300 million. Did you say the £300 million would
be borrowed?
Mr Coleman: What I said was that
the LDA is going to be meeting a number of costs, and is meeting
and has already met a number of costs, towards the Olympic Games.
It has had to meet the cost of the land acquisition; it is going
to have to meet the £250 million and £300 million contributions
to which we have referred. In order for it to do that, it has
been necessary for the LDA to agree to enter into a programme
of prudential borrowing under the prudential borrowing regime,
because quite a lot of this money, for example the land acquisition,
is required much earlier than would be possible if the LDA was
relying only on its grant. These costs, including the £300
million, will be being met through a combination of payment out
of that prudential borrowing, and out of the government grant
that goes to the LDA every year. The LDA has agreed a financial
strategy involving a 20-year period of borrowing which, together
with the capital receipts that it will receive from the land,
enables it to meet those costs.
Q271 Philip Davies:
I am not sure I am any clearer now than I was before! The point
I am trying to get to is, if you borrow the money, it ends up
costing you more than that in total, does it not? What are the
interest payments on this £300 million you are borrowing?
It will not actually be £300 million; it is going to cost
£300 million plus interest. What is the total cost?
Mr Lewis: In terms of our overall
borrowing costs over the 20-year period interest is about £330
million.
Q272 Philip Davies:
Is this on the £300 million?
Mr Lewis: No, this is on the global
something like £1.7 billion investment that the LDA is making.
On that overall amount, over 20 years, interest is about £330
million.
Q273 Philip Davies:
So on £300 million it is about another £50 million or
so?
Mr Lewis: No, you could not work
it back from that.
Mr Coleman: You cannot really
take out one element of this. The LDA is having to meet, as Manny
says, a programme of spending and investing, something like £1.7
billion in the Games. The great bulk of that is for the land acquisition,
and then there are these two additional contributions to the overall
cost of the Games. In total it has a strategy which involves borrowing
to meet some of that. You could say the £300 million is met
completely out of grant. You can really only look at it in the
round.
Q274 Adam Price:
Legacy is the watchword that everybody focuses on these days.
The London Assembly published a Report A Lasting Legacy for
London? with a telling question mark at the end. It made for
some, at times, quite depressing reading. Barcelona came out as
the best, but even in Barcelona it found that many of the main
beneficiaries were actually international property investors.
What does the Mayor think of the Report? Does he share its conclusions
and recommendations?
Mr Coleman: There are a couple
of things I would say about the Mayor's view of this. Broadly,
obviously we welcome the work the Assembly does in this area.
I think we were pleased there was a clear recognition in the Report
that London had made a strong start in terms of securing a physical
regeneration legacy from the Games, which is probably one of the
most important areas of legacy in terms of regeneration, and also
the transport benefits that London will get. I think the areas
where, you rightly say, the question mark appeared was in the
challenges of delivering the softer elements of legacy that everybody
has aspiration for, around employment, skills, around sports participation,
community participation, tourism and the like. It is true, if
you look back at the history of some previous Games, people have
not delivered as well as they had hoped and planned for there.
The Mayor certainly agrees that it is absolutely crucial that
we put in place very strong plans, investments and programmes
to make sure we do get the legacy commitments. We did publish
last week, and we can make available for the Committee, a document
called Five Legacy Commitments from the Mayor, which looks
in detail at some of the programmes and plans we already have
in place, and some of the targets that we have set here. I think
we do know that the "soft" legacy commitments, if you
call them that, will not fall into our laps, and we have to take
action now to deliver those benefits. That is why we do have a
very wide range of programmes underway. I do not know how long
you want us to talk about these. I would say, for example, dealing
with stuff that is more directly under the GLA's responsibility,
although much of this is funded by the LDA, we have some ambitious
programmes around sports participation where we are working very
closely with Sport England. We have run two years' worth of a
programme called the Summer of Sport which 130,000 Londoners benefited
from and participated in, 60% of them under 16. We are just about
to start a new Winter of Sport programme which involves more than
50 new after-school clubs right across London, and that is part
of an £80 million a year programme of investment in London's
young people, jointly funded by the Mayor and Government. That
is a very important area of the sport participation. The area
where I should probably let Manny speak, if you are content with
this, is on the very important area of what we are doing around
employment, skills and opportunities for people who are currently
out of work in London.
Mr Lewis: About 18 months ago
we published a taskforce report on how we should capture employment
and skills outcomes from the Olympics. Basically that had an aspiration
and foresees how we can deliver a reduction in London's worklessness
by over 70,000 between now and 2012, using the Olympic Games as
a catalyst. The Olympic Park itself will generate 11,000 jobs.
That is clear from the development work we have been doing and
the level of development in terms of commercial mix on the Park.
Of course the legacy has already started, because one of the things
we have done successfully is to build out the three Business Parks—one
in Leyton, one in Beckton and the other in Enfield—to capture
the businesses relocating, to protect 98% of the jobs in the area.
The follow-through steps to make the legacy of the future happen
involves the "CompeteFor" system, which is a website
portal enabling all of the Olympic contracts to be advertised
and promoted to all of London's SMEs. That is going to be launched
this week. We already have a track record with the ODA of delivering
about £1 billion worth of contracts to SMEs, 50% of which
were London beneficiaries. We envisage £6 million worth of
contracts coming through between now and 2012. We have a programme
of employment and skills training which includes the volunteer
programme to produce something like 15,000 young people beginning
to get into employment and skills thinking about volunteering,
using that as an incentive for the first time to help remove barriers
to employment. We are well en route to constructing a training
programme with two construction centres—one construction
centre already open at Eton Park in Walthamstow, and the second
one to open this year in Leyton. There is a whole swathe of programmes
on employment and skills to deliver that objective of a 70,000
worklessness reduction in London overall, and 20,000 of those
focused in the five boroughs, working closely with the boroughs.
Finally, there is a very comprehensive jobs brokerage programme
already running and working in the boroughs. Each borough has
a dedicated employment brokerage service linking people in their
community to the jobs that come up. The good news is that out
of something like 2,000 jobs now on the Olympic Park, 55% of those
jobs have gone to Londoners, and that is quite a success rate.
Q275 Adam Price:
Can we switch quickly from the soft to the hard legacy. The Committee
has toured empty, redundant, unloved buildings in other former
Olympic cities. This is a question for Neale Coleman really. Do
you think it makes sense to sign off on the design of venues before
it is clear who the long-term tenant is going to be?
Mr Coleman: Let me start briefly,
as you have said it is a question for me. I am probably going
to ask my colleague to say most of it. The reason for that is,
we are actually looking to the LDA at present to act effectively
as the legacy client; it has that role; that is what is agreed
with the ODA; the LDA to be carrying out a series of negotiations
with potential end-users, whether they are tenants or whether
they are users; and to be doing the detailed business planning
work around the future of the venues. It is probably best if I
let Manny deal with that.
Mr Lewis: The first thing to say
is that the relevant sport governing bodies and stakeholders with
a legacy interest have been involved already in the design work
with the ODA and the LDA. If you take the example of the Aquatics
Centre, British Swimming and the Amateur Swimming Association
have been closely involved in all of the discussions about design,
delivery and procurement of it. The overall vision for how we
can ensure that the venues are suitable and appropriate for legacy
has been taken forward up until now by the ODA. We have published
a very clear document setting out that sustainable regeneration
strategy with the ODA, but will be taken forward from this point
by the LDA. The main vehicle for that is the legacy master plan
framework, this is a statutory planning framework, which will
guide the development of the Park. The framework will be completed
in March 2009 and will set a vision for the character areas of
the Park; how you connect the venues in the Park to the communities;
how you make sure it is high quality, sustainable, high quality
environment that people want to live in; how you make the commercial
and residential developments work with the venues as well. There
are several work streams currently operating: one is a whole series
of business planning, venue by venue, working closely with the
governing bodies in some cases, taking account of some of the
potential tenants for those venues. That work has been done. There
is, secondly, an overarching business plan for the whole Park,
being led by Grant Thornton, which will lead us to some proposals
around future management of the Park which will enable the venues
to be successful, and to minimise the revenue subsidy. All of
that work is going to be followed through by the LDA. We have
now created a dedicated directorate joining together both the
employment and socio-economic issues, with the venues and the
hard capital issues, led by Tom Russell, who has got tremendous
experience from Manchester of integrating the Commonwealth Games
into an urban environment. Tom brings that knowledge and experience
to us. It is a very substantial programme whereby all of the design
work of the ODA is constantly evaluated and appraised with the
user, beneficiary and legacy in mind.
Q276 Adam Price:
A lot of work is ongoing but when do you think you will be in
a position to make a definitive statement about the legacy master
plan in relation to the main venues?
Mr Lewis: There will be different
key milestones there. The first one will be this month when we
will announce the appointment of a legacy master plan team. We
have gone out to OJEU Procurement and we are appointing a legacy
master plan that will give us that professional expertise on master
plan, where they have designed major schemes of this nature in
the past. That is the first milestone. The second milestone will
need to join together the development strategy for the Park—in
terms of: how do you maximise the overall returns—with the
best Park management arrangements, which is work that Grant Thornton
and Deloittes are working up for us. With the completion of the
legacy master plan itself, which will be March 2009, from there
you will get actual planning applications coming forth for venue
redesign, for venue conversion. There are a series of milestones
leading through to March 2009. In the spring next year we expect
to make the major announcement of all of those things in an integrated
way. I have to say, achieving that target will put us so far ahead
of any other city that I think it will be a major success story
for London.
Q277 Mr Farrelly:
Mr Lewis, when we toured the Olympic site the organisers stressed
how big the undertaking was and how much bigger the site was,
as an Olympic site, than, say, Wembley. Does that not make the
Olympic Stadium unsuitable in terms of physical size for a football
or rugby club to use afterwards?
Mr Lewis: It is very important
that all of the legacy usage both demonstrates a high proportion
of community involvement and engagement as well as elite sports.
We want the venues to be successful, to be embedded in the communities
and also to minimise the revenue subsidy. They are some of the
key objectives. As part of that you want to maximise the usage
of the venues. If you take the Olympic Stadium we think, based
on the business plan that has been done, a mixed use of football,
athletics and rugby is the right combination. The Stadium will
move to a 25,000-seater. The initial business plan demonstrates
that that mix is deliverable. We are now in the process of finessing
that in terms of negotiations with actual potential tenants. We
think it would be a perfectly effective stadium based on that
sort of level of usage.
Q278 Mr Farrelly:
Are people not physically going to be seated too far away, depending
upon which end of the Stadium the pitch is located?
Mr Lewis: Not from the business
plan work to date and the discussions we have had both with football
clubs and rugby clubs in relation to it. Clearly athletics is
a major commitment as a result of the overall agreement with the
IOC. The level of serious negotiated interest from rugby and football
professional bodies in this instance I think demonstrates they
believe it can work.
Q279 Mr Farrelly:
How many people are seriously interested, without disclosing any
names?
Mr Lewis: We are in discussions
at a serious level with three potential anchor tenants.
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