Examination of Witnesses (Questions 280
- 299)
TUESDAY 15 JANUARY 2008
MR NEALE
COLEMAN AND
MR MANNY
LEWIS
Q280 Mr Farrelly:
Football and rugby clubs?
Mr Lewis: Yes.
Q281 Mr Farrelly:
Mr Coleman, you talked about legacy and what you were doing in
terms of sports participation with Sport England. One of the messages
that the UK sought to project in winning these Games was very
much legacy now. I live in Hackney and I can look around and,
like so many inner-cities, there are so many schools that do not
have a blade of grass on them. I have asked this of everybody
who has appeared here and I will ask the London boroughs next:
I cannot think of a better way to get the Olympics anchored in
children's minds in particular, and to encourage participation,
than to make sure at the very least all those schools, in those
five boroughs as a start, that do not have a blade of grass are
identified and they can at least be provided with a rubberised
surface so people can actually play sport in those playgrounds.
What are you doing from your Office to help the boroughs coordinate
efforts to do that sort of thing and to make sure that the Olympics
are there in the minds of children now?
Mr Coleman: I think we are trying
to work with them and to coordinate activity in a wider range
of ways, both through providing funding, through providing encouragement
and looking, where appropriate, for us to support new facilities.
The boroughs themselves are doing a great deal of this. Our main
focus has been on trying to provide some overall programmes, which
I have already referred to, where we can provide both some significant
help with marketing, but also bring new funding in. For example,
I have talked about the Winter of Sport programme; we are talking
here about 54 new after-school multi-sport clubs, and this is
just the first year of this programme. It is a pretty big investment
and we will particularly there be targeting young people who are
currently not engaging in sport; obviously working with schools,
but working with clubs; and we are bringing in funding from the
Youth Sport Trust to do that, as well as putting in money directly
from the LDA. We have been talking, for example, to Hackney Council
about improvements that we can assist with on Hackney Marshes
where there is a lot of grass but certainly, as everyone agrees,
we could do with further improvements to facilities there to allow
them to be better used. I think the boroughs would accept this;
and I think they do a great deal of good work here. I live round
Hackney as well, but if you go to Clissold Park on a weekday,
or whatever, I do see a lot of Hackney school kids playing in
the park using the facilities there. I do think the primary responsibility
for developing that, for looking at new facilities, for identifying
needs, is with the boroughs. We have brought together a group
of all the organisations working on sport in London, which an
officer from GLA chairs, which includes Sport England, the Youth
Sport Trust, and London councils, to try and ensure we have better
coordination of this. We have commissioned a new strategy jointly
with Sport England to look at a London legacy sports strategy,
and obviously one of the main focuses in that will be youth sport.
In addition to that, as I have also referred to, the Mayor has
announced a new programme which will invest a total of £80
million a year in new youth activities in London. That is the
biggest single investment in youth facilities that we have seen
for a generation in London. It starts this year and one of the
focuses for that, not the only one, will be sport. That will provide
further opportunities for new facilities to be developed, I hope.
Q282 Janet Anderson:
How many of the venues are going to be temporary, and what is
going to happen to them afterwards?
Mr Coleman: It is probably easiest
if I say which of the ones are going to be permanent, if you do
not mind. What we are left with after the Games in terms of permanent
facilities are the Stadium, one of the arenas, and that means
there are, therefore, two arenas in the Park which are temporary;
the Velodrome remains; the Aquatics Centre remains; so there are
arenas in the Park which are temporary and they are the main large
temporary facilities. Those will be constructed in such a way
that they are capable of being dismantled and used elsewhere;
the components of them can be used elsewhere. The responsibility
for making those arrangements—and for, if you like, brokering
that with other areas of the country which may or may not have
an interest in that—it has been agreed should rest with
Sport England, and that is something they will be doing. Obviously,
as I think happened in Manchester, there is a huge amount of what
can appear quite incidental but is actually very valuable equipment
and the like, that will be left after the Games and which will
need to be reused: huge amounts of sport equipment for all these
sports which will be part of the overlay in all the venues, permanent
and temporary. Again, we will be looking to Sport England to lead
the process of making sure that can be used right across the UK.
Q283 Janet Anderson:
Do you know how Sport England will decide which areas of the country
are going to benefit? This is all very well for London but as
someone who represents a Lancashire constituency I would like
to think that there might be a legacy for other parts of the country
as well?
Mr Coleman: Absolutely. I think
that is really why it is a judgement that it should not be, for
example, for us to be involved in determining that, but it is
a function which should be carried out by Sport England. I think
I would be cautious about being drawn about how they are going
to do that, but I am sure they would be able to talk to you about
that.
Q284 Rosemary McKenna:
Can we talk about the permanent structures that are going to be
required to be converted. Obviously you have given us a clear
indication as to the plans you have for that. Who will actually
let the contracts? Will it be the ODA or the LDA? How will you
do that?
Mr Lewis: We have agreed with
the ODA that the LDA will take forward the legacy transformation.
In terms of the deconstruction of non-permanent venues then the
LDA will take that forward. Your question focuses on the permanent
venues, of which there are five.
Q285 Rosemary McKenna:
For example, the media centre?
Mr Lewis: There are five permanent
venues, which Neale described, plus the media centre, the broadcast
centre. The overall Park management, which will embrace the management
of those venues, and the model for that Park management, is one
that we are still developing with the boroughs and with the Mayor,
getting expert advice from Deloittes and from Grant Thornton.
One of the options, for example, is that you would have a special
purpose vehicle that may take overall management of the Park,
including the venues. The key thing here is that you have to build
in strong stakeholder engagement, and strong community interest.
You want a model which balances commercial delivery as well as
community and socio-economic outcomes.
Q286 Rosemary McKenna:
It will not be a commercial organisation which will take them
and just make lots of money out of them?
Mr Lewis: Absolutely. You would
have to gear the constitution of the organisation to have a strong
community interest, strong socio-economic interest; but you need
commercial expertise because you want it to be as revenue-neutral
as possible in minimising the subsidy.
Q287 Rosemary McKenna:
Hopefully the five boroughs would represent the communities and
the stakeholders?
Mr Lewis: Absolutely.
Q288 Rosemary McKenna:
Will the national governing bodies of sport be involved in that?
Mr Lewis: It is very important
that they are involved, because they are involved in our discussions
at the moment about use and occupation of the venues. They would
have a clear interest in the long-term management of the venues.
Of course, another important part is the Lea Valley Regional Park
Authority where a number of those permanent venues are on their
land; and they would be a key partner in the long-term management
as well.
Q289 Rosemary McKenna:
I think everybody is concerned, with the amount of money that
is going in, that there ought to be the maximum benefit for the
local communities and for all of London?
Mr Lewis: Absolutely.
Q290 Rosemary McKenna:
With the transport system surely it is possible to allow all the
boroughs, the education authorities, to participate and take advantage
of all these facilities. Is that a major part of your thinking?
Mr Lewis: It is distinctly part
of our vision. In the Olympic Park Regeneration Steering Group
meetings which we hold with the boroughs (the borough leaders
are completely party to this) we have been discussing how can
we enable the Park to be a destination location in its own right,
not just in terms of sports, and one of the biggest new European
partners that will appear, but also in terms of the whole tourism
offer, and the whole visit London offer. That is part of a vision
the legacy master plan framework will bring forward.
Q291 Chairman:
You will be aware that this Committee recommended a year ago the
taxpayer and the Lottery subscriber should see some benefit back
from the increase in value in land which takes place as a result
of the investment. You will also have seen on the front page of
The Times the speculation today that the Secretary of State's
ambition to realise £1.8 billion is now looking unlikely
to be achieved. Would you like to tell us what your current estimate
is of how much can be raised?
Mr Coleman: I did indeed see the
front page of The Times today and was surprised to see
that it was claiming to be reporting news, because last April
the Mayor, in a statement at a press conference, put on record
every single figure that is in The Times today and explained
the position; which is that clearly we are looking here to forecast
receipts from sales of land that will be taking place in the period
up until 2030. Anyone who could claim to put a single estimate
with any degree of reliability on land receipts over a period
like that would, if they did it successfully, turn out to be an
extremely wealthy person. Clearly it is only possible to estimate
a range at this time. That is all the more so because the actual
proceeds are not dependent simply on increases in the price of
land over this period, but on a very large number of other factors:
including exactly the type and quantum of development that takes
place; the density of those developments; the particular land
uses and the split between commercial and residential and other
uses; the amount of planning obligations that have to be paid
for as part of the process; the level of affordable housing required
in the developments; and the amount of social housing grant that
might be paid to facilitate those residential developments. So
there are a huge range of factors which have to be taken into
account. As I say, as the Mayor said as long ago as last April,
the LDA, which has to borrow money as we have dealt with it in
answering your questions, has to take an extremely prudent and
cautious view about what assumptions it can make because it is
borrowing money and it is a public body. The Mayor told the press
conference last April that that figure was around £800 million,
precisely the figure which appears in today's The Times
allegedly as news. The LDA has always made it quite clear that
it has a planning assumption in order to meet its financial strategy,
and that it needs to get £800 million back. That is a very
prudent and cautious figure. The land value increase built into
that is 6%. In the last ten years the lowest increase in any year
in land values in that area has been 6%; and the average increase
has been 20%. It also has extremely prudent assumptions in terms
of the density and quantum of development. It assumes 50% affordable
housing in line with the London Plan—70% of which is social
rented housing; and it assumes no payment of social housing grant
whatsoever. These are all very, very cautious and prudent assumptions.
To suggest that in some way actually we are only going to get
£800 million and definitely no more is just a distortion
really of the situation. In fact the LDA has commissioned a range
of estimates and assumptions here, and they range broadly between
£800 million and £3 billion. The biggest driver in this
range is, of course, the increase in land value. The £3 billion
number comes from an assumption that you will achieve the 19%
that we have seen in the last 20 years in London—a period
obviously when there have been good and bad years for the property
market. We believe it is obvious there is a very strong likelihood
that a figure way in excess of £800 million will be achieved.
It is precisely for that reason I know the Government was so keen
to renegotiate its Memorandum of Understanding with the Mayor,
because the original Memorandum provided that all the land receipts
went to the LDA. Precisely because of the likelihood that a significantly
higher sum would be achieved, we entered into negotiations which
set out, going up to the figure of £1.8 billion, how any
receipts would be split. Finally, because it is irritating to
see such an inaccurate story appearing, all our valuations and
all the estimates we have done precede, for example, the decision
of the Government to provide the funding for the Crossrail development
which will go into Stratford Station, and which plainly must have
a major impact on increasing both land value and development potential
of these sites. I do not think there is cause to express the concern
that was expressed in that article about the likelihood of us
seeing much greater returns from the land proceeds, and the possibility
of fully repaying both the amounts that have come from the Lottery
and, indeed, securing additional funding that the LDA can invest
in the regeneration of the area.
Q292 Chairman:
You say you adopted a very prudent approach to this, but when
the ministerial statement was issued in June it did go through
how the £1.8 billion, which it was hoped to raise, would
be allocated between the LDA and the Lottery, and it then speculated
about how they would then divide any additional sums which were
raised beyond the £1.8 billion. Do you think it is realistic
still to expect that it could exceed £1.8 billion?
Mr Coleman: Indeed I do. As I
say, one of the main drivers here is land value. If and obviously
it is a very big "if", but it is by no means implausible
given what is happening in east London; it is by no means implausible
given the long-running gap between housing supply and housing
demand in London, but if land values in this part of London increased
in the next 20 years in exactly the same way as they increased
in the last 20 years, we would generate not £1.8 billion
but £3 billion through these land sales. As I say, even were
land values not to increase in that way, there are a whole range
of other factors, such as the quantum and nature of development,
such as the quantum of affordable housing, which if it was varied
from the assumptions we are now making would again mean that land
receipts would be very much higher than the numbers that have
been quoted.
Q293 Chairman:
You will have seen The Times article and you have talked
about potentially reaching a 19% increase in values per annum.
Savills described the idea of raising 16% per annum as complete
madness; and Spicerhaart went on to say that we have got to the
top of the market and that 16% is ludicrous?
Mr Coleman: All I can say is I
am familiar with getting a range of views from different estate
agents about values. We are not talking about next year when everybody
agrees that property prices and house prices may go off—although
I have to say, if you look at what prices did in Hackney, Newham
and places last year, you will see that these figures are more
than realistic. We are talking about looking at an historic trend
which has been met over the last 20 years. If people say, "That's
not going to happen again", I cannot quite see on what basis
they say that, given that there is a huge mismatch between the
supply and demand of housing in London, and given the level of
investment and improvements that are happening in this area through
Crossrail, other things the boroughs are doing and so on. As I
say, you do not actually require necessarily, in order to meet
for example the £1.8 billion, 19% or 20%. You can vary other
assumptions in order to produce greater values. It really is not
the case at all that £1.8 billion is an unrealistic figure.
I would anticipate that in all likelihood this figure will be
met and exceeded.
Q294 Mr Farrelly:
I am not surprised about The Times article. There is a
vote today in the Commons and the additional raid on the Lottery
is unpopular in many of the constituencies around the country.
Can I just focus on your £800 million figure. Are you saying
now that under the Memorandum of Understanding you will be required
to be repaid £800 million before a penny is given back to
the Lottery?
Mr Coleman: No, Manny will correct
me if I get this wrong, but the number we have to get before anything
is paid back to the Lottery is £650 million. The reason why
those numbers differ is that we need the £800 million to
come in to meet the whole of the strategy which I referred to
earlier, which does not just involve repayment of the land; it
involves contributions from the LDA as well.
Q295 Mr Farrelly:
That is from your own internal point of view. The £650 million
is that capped in the Memorandum of Understanding?
Mr Lewis: The way it works is
that the first £650 million realised in value will be returned
to the LDA. Beyond that level there is a "profit share".
Q296 Mr Farrelly:
I understand that. So £650 million is fixed at future prices.
That is £650 million in the future and not £650 million
now?
Mr Lewis: Yes, it is a fixed sum.
Q297 Mr Farrelly:
Under the Memorandum of Understanding who is going to be responsible
for realising the assets and the land sales? Who is going to handle
the process?
Mr Coleman: The land is owned
by the LDA for the most part. To that extent the LDA will have
the responsibility. It is conceivable that it may decide to make
arrangements to set up a new vehicle to do this, as Manny has
talked about. Fundamentally the answer is the LDA.
Q298 Mr Farrelly:
I ask the question, Chairman, because beyond £650 million
three-quarters of the additional receipts are going to go back
to the National Lottery. If you are handling the sale there is
not as great an incentive to go beyond £650 million as someone
who is handling the sale on behalf of the National Lottery, or
an independent party?
Mr Coleman: We did actually try
and draw this agreement up so the split is intended clearly partly
to ensure that there is an incentive on the Agency and that it
does derive benefit from increasing the level of receipts. That
is why we did it in this way. I think if there was any question
that this was not being done in that way and the Lottery was being
disadvantaged through an inappropriate approach to the disposals,
which I very much hope would not come about, but if that did,
there would be other means open to the Government at the time
to deal with that situation, the most obvious one being—assuming
that we still have something like the arrangements we have today—the
development agencies depend fundamentally on grant funding, so
there is a pretty strong lever to use there.
Q299 Paul Farrelly:
What thought has been given, in your ranges of estimates, in terms
of tying in the process with the individual boroughs' regeneration
strategies? For instance, your efforts to maximise the sale proceeds
of the media centre may not quite tie in with what the local borough
might envisage as a use of the site and might, therefore, assent
to in its planning procedures.
Mr Coleman: This is a very important
point that you make. Clearly, the boroughs, as the local planning
authorities and as the representatives of local communities, do
have very strong interests and desires that we ensure that the
development strategies which take place here are appropriate in
line with their plans and are producing new, genuinely sustainable
communities. That is something which the Mayor, certainly, is
very strongly committed to. There is no question of us actually
adopting an approach that says: "We are going out to maximise
value come hell or high water". If we were doing that we
would not have built into our assumptions 50% affordable housing
and 70% of this for social rent. If we had not built that in the
proceeds would be way up in the air, but clearly we would not
be doing anything for local people and their communities. Similarly,
in the planning framework that we have agreed with the boroughs
here, there are proposals for major developments of new social
infrastructure—schools, health facilities, community facilities
and emergency service facilities—to go alongside these residential
developments, and that will require payment of additional contributions
from developers. That, again, is built in here. There is also
a concern about the type of housing that is built here in the
boroughs, and there is a commitment, for example, in the planning
framework that there will be a broad range of different types
of housing and that 44% of the housing will be family housing,
which is to meet the sorts of needs that the boroughs have. So
we are very sensitive to these points, and that is one of the
reasons why over the last six to nine months new machinery has
been created to very much extend and deepen the involvement of
the boroughs as real partners in this development process. We
have some formal structures; a steering group, at both senior
official level and at ministerial level, bringing together the
Minister for the Olympics, the Minister for Housing and Planning
with the Mayor and the leaders of all the boroughs, to make sure
that they have oversight of the work that is going on in this
area. I want to try and reassure you that we are very much looking
here to do a programme that is regenerating, that is bringing
benefit to existing communities, that is meeting local needs and
is supported by the boroughs. It is not a programme that is in
any way driven simply by the desire to maximise proceeds.
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