Examination of Witnesses (Questions 140-159)
14 NOVEMBER 2007
DEPARTMENT FOR
CULTURE, MEDIA
AND SPORT
AND OLYMPIC
DELIVERY AUTHORITY
Q140 Mr Mitchell: The Treasury always
keeps an eagle eye on expenditure and it was going to guarantee
the project. Did the Treasury not demur in any sense?
Mr Stephens: The bid was collectively
agreed across government but, of course, the undertakings were
signed personally by the then Chancellor of the Exchequer.
Q141 Mr Mitchell: It would be nice
if the Treasury adopted the same approach to projects in the North
or infrastructure sector projects. The tax status is reported
here to be unclear. I thought the Treasury had some responsibility
for VAT and who paid it.
Mr Stephens: I think the tax status
now is very clear.
Q142 Mr Mitchell: It is clear now,
yes, but it was not then.
Mr Stephens: At the time of the
bid it was unclear, largely because the delivery structures were
not clear and the tax status often depends upon the delivery structure.
For example, if it had been delivered through a local authority
type body then it would have been entitled, as local authorities
are, to reclaim the VAT as, for example, Manchester did for the
Commonwealth Games.
Q143 Mr Mitchell: That is amazing.
Leaving it out of the calculations does give the impression that
the original costings were intended to deceive.
Mr Stephens: As Mr Hill was bringing
out earlier, the tax is a receipt to the Exchequer so it is not
an additional cost to the taxpayer. In one sense it is perhaps
painting a false picture to suggest that the tax is a cost increase
to the taxpayer.
Q144 Mr Mitchell: Okay. How many
of the original people, the original pool of people, who developed
the original estimates were also in the team that upped them by
£5 billion in the latest estimates?
Mr Stephens: I am sorry, I do
not know that.
Q145 Mr Mitchell: But there was some
continuation of personnel?
Mr Stephens: Yes, in various forms,
but I cannot give you a precise answer.
Mr Higgins: Just on that issue
of the VAT, it was very, very clear in the bid documents that
were public in Singapore that VAT was not included as a cost.
It was clear that it was yet to be determined what the delivery
vehicle would be. There was not any issue that it was not public,
it was always very public that VAT was not included.
Q146 Mr Mitchell: Let us move on
to a point that other people have raised, and that is inflation
of construction industry costs. Here you are at a time when we
have got Crossrail roaring ahead, or digging ahead, we have got
the Thames Gateway roaring ahead, we have got the Government embarking
on a big new housing programme and construction firms have got
you by the short Olympic rings because you have got a finite date.
The new Wembley Stadium had a date but it was not as inflexible
as yours and look at the cost escalation there. Are you seriously
telling me that there will not be a massive cost inflation on
this project?
Mr Higgins: The biggest risk on
the project is time. We have been really, really clear from day
one that the biggest thing we can do to protect public money is
gain as much time as possible as we can at the start and be incredibly
transparent about our timelines, so we have published a public
document to the general public about what milestones we are going
to hit by July next year, and I have got a copy here if you wish
to see it, and we are sticking to those deadlines. Where the big
cost will come is not cost escalation, it is acceleration. If
Wembley really did have to finish on its original date no matter
what the cost that is when you spend very serious amounts of money.
Our point is to avoid acceleration costs at the end of the project
by hitting our milestones now.
Q147 Mr Mitchell: What kind of cost
inflation occurred in Sydney? You had the same finite date there.
Mr Higgins: It is really not applicable
to compare Sydney. Sydney was a site where the site was completely
controlled by the government and cleared at bid stage and, in
fact, the budget was finished prior to the bid stage.
Q148 Mr Mitchell: There was cost
inflation.
Mr Higgins: Yes, of course there
was cost inflation on the project but it did meet its budget and
its budget was published two years before the Games finished.
Q149 Mr Mitchell: So I am more optimistic
about London. It says in the Report that you will not know the
full extent and costs of land contamination until you have got
vacant possession of the land and, therefore, access to the full
site. You got that in summer this year. Have the estimates of
the costs of land contamination increased?
Mr Higgins: No, they have not.
Around 84% of the soil investigation is now completed on the site.
You are right, until we had vacant possession there were businesses
there which we could not disrupt in terms of drilling through
their floors, but there is nothing we have discovered since we
have taken over the site. We have not done all the site, there
is a bus depot site which we are waiting until the end of the
year to take possession of. There is no advice that I have, and
I have reviewed the project extensively, that there is any contamination
that is unexpected. It is a contaminated site. As you know, just
a month ago we discovered radium on the site and there are other
issues, we have found Roman ruins and other things on it.
Q150 Mr Mitchell: You have walked
over it and you are still healthy!
Mr Higgins: Something like that,
yes.
Q151 Mr Mitchell: I take a somewhat
more jaundiced view of all of this looking at it from the North
than London Members might take. What are you going to do to mitigate
the reduction of £1.6 billion of Lottery funding available
for projects in my area? What is being done to mitigate that?
Not all the £1.6 billion is going to Grimsby!
Mr Stephens: I was going to say
that sounded slightly generous! In terms of spreading benefits
across the UK from the Olympic Games, of course there are a number
of venues outside of London. Mr Higgins has already described
some of the steps that have been taken to ensure that the business
opportunities are available and spread beyond London. There are
the tourist opportunities.
Q152 Mr Mitchell: What, beforehand?
Mr Stephens: Before, during and
after the Games.
Q153 Mr Mitchell: Yes, but this £1.6
billion affects the next few years, does it not?
Mr Stephens: Yes, but, as I said
earlier, over the course of time in which that £1.6 billion
is being taken, the period from 2005-06 to 2012-13, the total
income to the Lottery will be something like £11 billion.
Q154 Mr Mitchell: You hope.
Mr Stephens: So very significant
sums will still remain.
Q155 Mr Mitchell: Let me take another
area, and that is funding of community sport. Here we are, building
an Olympic project that it is going to better increase participation
in sport and make us a healthy nation, but meanwhile, to get that
£1.6 billion, you are reducing by £124 million the funding
for community sport. That makes no sense, we need that spending
to train the athletes who are going to participate in the Olympic
Games.
Mr Stephens: Well, of course,
that includes the Lottery contribution that was always set out
well before.
Q156 Mr Mitchell: Yes, but £124
million is a lot to take out of community sport.
Mr Stephens: The additional being
taken is £70 million from community sport. At the same time,
the sport distributors across the UK will have about £686
million still to invest in public sport and, of course, at the
same time, in the summer the Government announced the investment
of an extra £100 million in school and community sport to
enable a 5R offer to children and young people. Sport England
have also announced that they are planning to raise an additional
£50 million from the private sector. This is against a background
in which Government funding for Sport England in particular has
risen from £50 million ten years ago to £350 million
now.
Q157 Mr Mitchell: That is the same
private sector that has cut its contributions to the Olympics.
Let me just give you a concrete example. I was on holiday in California
this year, in a little place of 100,000 people, and it has got
five Olympic size swimming pools. London has two, and one of those
has now closed. We need more spending and funding to train the
athletes, do we not, on a big scale?
Mr Stephens: Of course, the Olympics
and the Aquatics Centre will provide two 50 metre pools and a
diving pool within London that will be available both for elite
and community use after the Games.
Q158 Mr Mitchell: The agreement on
the benefits of the legacy and what happens to it between the
Mayor and the Department is not legally binding. What guarantee
is there that the funding from the Lottery that has been taken
from the Lottery will be made good out of the profits accruing
from the Games?
Mr Stephens: The Memorandum of
Understanding covers the Mayor's contribution to the Games. That
is currently being paid over.
Q159 Mr Mitchell: It does not cover
any guarantee for the Lottery.
Mr Stephens: The Mayor has signed
a Memorandum of Understanding under which he is currently paying
London's contributions to the Games and if there were any doubt
as to whether profits would be shared in the future no doubt Government
could take steps to make that legally binding. I have no reason
to think that will be necessary.
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