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Lord Bruce of Donington: My Lords, we must all accept the feasibility of error. From that it flows once again, as though it came from Aneurin Bevan himself: the experts should be on tap, never on top.
For my part, I wish the Dome every success. As soon as the doctors have manoeuvred me enough, I hope to be able to go and see it. In the meantime all of us, including myself, can pray that we ourselves will never make any larger mistakes either in our business, professional or political careers.
Baroness Noakes: My Lords, one of the most shocking things that I have heard during this debate is the noble Lord, Lord Bruce of Donington, commenting that £900 million is peanuts and, furthermore, going on to make a wholly unsubstantiated forecast that the whole of it will be recoverable many times over.
The noble Lord is a member of the Institute of Chartered Accountants, of which I was president last year. As a much honoured member of my institute, I believe I shall have to recommend him for continuing professional development so that he can get straight in his mind matters relating to numbers. We are talking about very large sums of money.
I read the NAO's report with incredulity. If we found the levels of financial and operational expertise that seem to have existed in NMEC in any commercial company, that company would have imploded or, to be more technical, would have gone into insolvent liquidation. I want to touch on one or two of the financial aspects of this matter.
The NAO report, somewhat inaccurately, tells us that the financial difficulties were largely as the result of shortfall in income. Today we have heard much about those shortfalls in income. Remember that ticket sales and associated visitor income will fall short of the original budget by a staggering 70 per cent. We are talking about large orders of magnitude in terms of getting estimates wrong.
I shall not go through the sequence of the 10 million and the 12 million, although I support the noble Lord, Lord Bruce, in being surprised at the figure of 12 million being adhered to notwithstanding that a prudent estimate of a lower figure--namely, 8 million--had been produced. We can all view matters with hindsight, as a number of noble Lords have mentioned.
In business one learns that success or failure often comes down to how well risks are recognised and managed and not how well the predictable parts of the business are managed. Identifying risks and managing
There was still much to play for. We knew that the content was not settled; access was not settled; marketing plans were not settled; and pricing was not settled. People should have been focusing on many matters in a detailed way. Sound business planning and sound business management are about identifying those areas, thinking the unthinkable in terms of what could go wrong and producing sound plans in response; not waiting until the year starts and we find that advance sales have fallen massively short of budget and saying, "There is not much we can do about it". Much should have been done a lot earlier.
I do not believe that it mattered that the plan was dated April 1997. The fact is that it was not submitted until after April 1997 and, therefore, no government decision could have been made until May 1997. When that plan was submitted for decision it should not have been approved and the project should not have been given the go ahead as it was without serious consideration being given to detailed contingency plans. My reading of the NAO report, and anything else that I have read, does not display that there was ever any appreciation that this was a major risk area which should have been dealt with. The project was simply given the approval to go ahead. That is not a decision made by the former government; it is a decision made by the current Government.
I shall now say a little about directors and the role of directors in NMEC. My noble friend Lord Trefgarne talked about whether proper accounting records had been kept and there was a query raised by a noble Lord on the Benches opposite. If one looks at the PricewaterhouseCoopers' report--project Mozart--one will see that the systems were poor, did not record all the liabilities and some of the assets were not really assets at all. We have learned that the company did not have a proper asset register. I suspect that one could not have said that the financial position of the company could have been disclosed with reasonable accuracy and, therefore, proper accounting records could not have been kept. That is one important area of the responsibilities of directors under company law, and this is a company that comes under company law.
Another point is that directors must not trade while insolvent. The PricewaterhouseCoopers' report reported that in August 1997, as we have heard, the company was insolvent. The NAO report says that--
Lord Falconer of Thoroton: My Lords, the noble Baroness will be aware that the reason why the PricewaterhouseCoopers' report said that was because of the unidentified wind-down liabilities. She will also agree that the directors would have been bound, as a matter of law, to continue trading until they made the
Baroness Noakes: My Lords, I hear what the noble and learned Lord has said. Perhaps I can continue. The NAO report also gives the view of the current chairman of NMEC that the company was probably insolvent back in February 2000. The question is: was there a responsibility on the directors to respond once they knew about that? There are bigger questions about when the directors should have known that the company was insolvent. If the company had been insolvent for most of the year, the grant applications--
Lord Falconer of Thoroton: My Lords, I apologise for intervening again. The noble Baroness is making quite significant allegations against the directors, who are not here to defend themselves. To be fair to them, she should perhaps speak to the following matters: first, the PWC report identified the company as being insolvent because of the unidentified liabilities; secondly, the directors would be bound to go on trading until they made the application to the Millennium Commission; and, thirdly, the Millennium Commission granted the application within days.
Baroness Noakes: My Lords, the most important point is the view of the company chairman that the company had been insolvent for most of the year. One has to query whether any of those grant applications were properly made in order to deal with that matter.
Baroness Anelay of St Johns: My Lords, will the noble Lord give way? Members on the government side may care to reflect upon the way in which we normally conduct our debates in this House. The Government are here to answer questions. When a Member of the Opposition makes a point, and when he or she is able to check the facts outwith the House, I am sure that he or she will wish to write to the noble Lords concerned. If the noble Lord, Lord Grabiner, wants to ask a question of my noble friend, perhaps he will give her the courtesy of the opportunity to make another point first.
Lord Falconer of Thoroton: My Lords, the Government have given no indemnity in respect of wrongful trading. As the noble Baroness knows full well, wrongful trading involves knowing that one is trading wrongfully and no such suggestion is made here unless the noble Baroness is making it. If she has material to suggest that such indemnity has been given, she should point to it.
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