Examination of Witnesses (Questions 300
- 311)
TUESDAY 15 JANUARY 2008
MR NEALE
COLEMAN AND
MR MANNY
LEWIS
Q300 Paul Farrelly:
Given all those balancing considerations, you are confident, are
you, that the Lottery will be repaid in full?
Mr Coleman: I am actually personally
confident that the Lottery will be repaid in full, but as I have
said we are forecasting here land sales going out to 2030 and
there is a lot of uncertainty about the future. Who knows what
external events may occur during that period that will change
the way we look at things. If you look, as I say, at the ability
not just to get the money in through looking at the increase in
land value but, also, by adjusting other things that are open
to us to adjust, I believe that there is every prospect that the
Lottery will be repaid in full.
Q301 Mr Evans:
So The Times has got it completely wrong, and it should
have said: "Revealed: £2 billion Olympic bonanza"?
Mr Coleman: No. I think what The
Times should have done is, as I say, not to have reported
this on its front page, since it is not news, since everything
was said by the Mayor nearly a year ago. It has always been the
case that there is a broad range being looked at here, between
£800 million—a very, very cautious and prudent figure—up
to £3 billion, which is the figure you would get if the next
20 years was like the last 20 years, and anyone who claims to
be able, as I say, to tell you now what the price of a hectare
of land in Stratford is going to be worth in 2023 is either a
fool or a genius.
Q302 Mr Evans:
Part of the problem, you say, is there is a lot of uncertainty.
One of the certain things about this whole procedure is that none
of us will be here around this Committee table in 2030 to say
whether you are right or whether you are wrong. You can understand
the cautiousness of the whole thing, because when we first started
this procedure, as you know, the Olympics was going to cost two-and-a-bit
billion pounds and we are now approaching £10 billion. Therefore,
you can understand that everybody wants to get as accurate as
they possibly can the costs that are going to fall on certain
bodies. Janet has already said (and she represents a seat in Lancashire,
and so do I) that although they call it "The London Games"
the fact is that the whole of the UK is contributing towards this,
in one way, shape or form or another, and there will be good causes
in the North West of England who will be foregoing money in order
that these Games can take place. Can you understand the concern?
Mr Coleman: I very much take your
point and I do understand the concern that there is, particularly
in an area which is as intrinsically uncertain as looking out
over 20 years at a series of land sales. So I do understand that.
Q303 Mr Evans:
Do you think that the Memorandum of Understanding which Tessa
Jowell signed should have said that it should not be £1.8
billion (upon which, clearly, the land sale increases are about
16%, and now everybody is saying 6%) and that it should actually
have said there are a range of values that could be met because,
clearly, £1.8 billion seems to now be fanciful.
Mr Coleman: First of all, just
to reiterate, I do not accept for a moment the £1.8 billion
is fanciful. What you have to bear in mind is that, as I understand
it and as I read it, the Memorandum of Understanding did not say,
in any way, as The Times totally inaccurately reports today,
that there has been an agreement that the proceeds will be £1.8
billion. It does not say anything of the kind. What it does is
to provide for what will happen as money comes in up to a total
of £1.8 billion. We could have gone beyond that—arguably
we should have done—and that would not have amounted to
saying that we were going to get in £3 billion; it would
have amounted to making an agreement to what we were going to
do with the proceeds under a range of future scenarios, accepting
that this is a period that will go out for quite a long period
of time. Obviously, when we sell the land is by no means certain.
I imagine—as you said, it probably will not be us—that
the people who have responsibility for this (for example, if 2013—unlikely,
I think—is a bad year for the property market in East London)
will take a view on going later rather than earlier. People will
be sensible about balancing all the objectives we have, I think,
in terms of making sure we get the money back, precisely because
I think everyone is committed to making sure the Lottery is repaid.
Q304 Mr Evans:
When will the Lottery get their money back in full?
Mr Coleman: It will obviously
depend on the timing of the land sales. That is something which,
as I say, will be a matter for judgment dependent on the conditions
in the property market at the time. If you want me to speculate,
I would have thought that it is likely that in the immediate aftermath
of the Games that may well be a good time, and there may well
be strong arguments for trying to sell land at an early stage,
but that might not be the case. There is uncertainty here, I do
accept, but I do think, overall, there is a strong and robust
position to expect significant repayments. Frankly, we are looking
not just for the Lottery to get money back; we really are looking,
here, for the LDA to get further money beyond the £675 million,
without any doubt, because that money will go to help the further
regeneration of the areas between the Olympic Park and the river,
where there are ambitions to build very large numbers of new homes
and create new jobs.
Q305 Mr Evans:
You talk about property values but you talk, also, about social
housing, which will, clearly, not draw as high a price from the
land. Could that be a variable as well—that if the £800
million is not looking as rosy as you think and you want to get
a bit more money, the content of the social housing could be reduced?
Mr Coleman: That is indeed a variable
that could be looked at. Indeed, it is a matter for discussion
with the boroughs, I think, in particular, because they will have
views about the types of housing they want there. If, for example,
there was a view and a consensus that we should be looking at
increased proportions of, say, equity-share housing as opposed
to social rent housing, or indeed a greater proportion of market
housing, and that was agreed, then that would, you are right,
significantly increase the money and help to get it back. We felt
it right, for the purposes, as I say, of our core estimates, we
would take the most prudent thing, the thing that puts the number
down, and that is why we have assumed 50% affordable housing—70%
of which social rent—if you like, the sort of full-blooded,
London Plan and overall London policy—as the best basis
for making calculations.
Q306 Mr Evans:
Will the London Council Taxpayer, if it is towards the top end
of the estimate, get any money back?
Mr Coleman: That is very much
something for the future.
Q307 Mr Evans:
That is why I am asking it.
Mr Coleman: It is right to say
that existing plans do not make provision for that. Clearly, if
it were very much towards the top end of the range, I imagine
that is something that would come on to the agenda, but I would
say, again, that we are looking here at an extremely ambitious
regeneration project. We are looking not just at the Olympic Park;
there is a very big area, as you will know, going south down to
Leamouth and beyond where, crucial to the future of London, we
have a planning framework in place with the boroughs that is looking
at 40,000 new homes and 50,000 new jobs. We will need continued
investment in that. We will do that over time. Just as the Olympics
has vastly accelerated our ability to regenerate the area of the
Olympic Park, additional money coming in, in this means, would,
similarly, accelerate our ability to complete regeneration and
create new opportunities in the rest of this area.
Q308 Mr Evans:
A final question, which is, if the Games end up costing more than
the £9.3 billion, do you think the money from the land sales
will go to fill any black hole that exists because of the increase
in the price of the Games?
Mr Coleman: I really do not want
to be drawn there, and I am going to say that the Mayor's position
on this is absolutely firm that he will do anything to prevent
this costing more than £9.3 billion. When you had John Armitt
here he said something like: "Obviously, no one can give
you a guarantee, signed in blood, that this will not happen",
but the Mayor's absolute determination is that the Games will
not cost more than the prudent budget that has now been agreed.
Q309 Philip Davies:
In a previous answer to Paul Farrelly you said that there were
three potential tenants for the Olympic Stadium after the Games.
I think I read in the paper that Leyton Orient were one. Are you
in a position to confirm that and, perhaps, explain who the other
two might be?
Mr Lewis: Leyton Orient have put
their interest in the public domain because they have consulted
their fans on the option of the Olympic Stadium. The other interested
tenants, because of the commercial sensitivities, we cannot release
or confirm who they are, at this stage.
Q310 Mr Evans:
When is that going to be finally resolved? Have you any idea when
we can expect an announcement?
Mr Lewis: We think it is very
important that this is delivered in an integrated way, so you
know what sort of vision you want for the Park through the framework,
you know what development brief you want, in terms of realising
a value, and that you also know what the Park management arrangements
are. Those three conditions will all combine round about Spring
2009 and we think that is the right time to then be able to say:
"And these are the tenant arrangements that we think fit
into that delivery vehicle for the Park".
Q311 Adam Price:
You still, clearly, believe that the upper range of expectation,
in terms of land values, is at least a possibility. I would like
to ask you, therefore, what is your understanding as to what will
happen to any surplus raised?
Mr Coleman: Above the £1.8
billion? Well, as I understand it, at present, we would be reverting
to the situation in the old MoU that all that money would go to
the LDA—it is the LDA's land.[4]
However, the LDA works in close co-operation with government on
regeneration projects and, as I have said before to colleagues
of yours today, ultimately the LDA depends on government grant-funding
to carry out its activities. So, obviously, in the event that
proceeds did, in the future, possibly go significantly higher,
there would be a discussion to be had between government and the
LDA about how the extra money was being used. There would be a
trade-off here because, obviously, one choice open to the Government
would be to say to the LDA: "You have got all this extra
money in here, we have agreed with you that you are going to spend
this much on the further regeneration in the Thames Gateway and
in East London, but that means that you do not need so much grant
from us." So, in that sense, this is, inevitably, an ongoing
discussion between the agency and government about how these proceeds
are used.
Mr Lewis: The MoU says that expressly—that
in the event of realising beyond £1.8 billion there will
be discussions between the Mayor and government about the best
use of those resources.
Adam Price: Members of Parliament in
Wales, Scotland and the North of England will probably have something
to say about it as well! Thank you.
Chairman: We need to move on. Can I thank
you both for your evidence.
4 Note by Witness: The position is as set out
by Mr Lewis in the following answer. Back
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