Wembley Stadium

Part of the debate – in the House of Lords at 3:30 pm on 23 May 2002.

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Photo of Baroness Blackstone Baroness Blackstone Minister of State (the Arts), Department for Culture, Media & Sport, Minister of State (Department for Culture, Media and Sport) (Arts) 3:30, 23 May 2002

My Lords, with the leave of the House, I shall now repeat a Statement given today in another place by my right honourable friend the Secretary of State for Culture, Media and Sport. The Statement is as follows:

"With permission, Mr Speaker, I would like to make a Statement on the progress of the National Stadium project. This fulfils my commitment to the House on 7th May to update honourable Members before Whitsun.

"I would like to address four main points concerning the project. First, the extent and nature of the government responsibility for this FA project. Secondly, the allegations that arise from the James and Tropus reports into the early stages of the tendering process. Thirdly, to update the House on progress made since I last informed the House on 7th May. And, fourthly, I would like to comment on the lessons learnt and the changes put in hand as a consequence.

"First, then, the role of government. Quite clearly, the project is primarily a matter for the FA. It wants a national stadium. It wants it at Wembley and it is prepared to pay for it. But it is a clear principle that big infrastructure projects require government engagement, whether financial or in facilitation. Patrick Carter's report has made that clear.

"Government support is plainly a factor in the market's assessment of a project such as this. The first Wembley proposal was over-ambitious. It was poorly managed; the tendering process was flawed; secure bank lending was not achieved; costs escalated; and the Government's role was ambiguous. It was those weaknesses which led to delays; to the request from the FA for extra public funds, and to the Government's decision to ask Patrick Carter to carry out a full review of the project's feasibility.

"Now, the Government can decide to support the FA or, of course, can walk away. If we walk away, it will almost certainly stop the project in its tracks. What we cannot, should not and will not do is to take over the direction of the project itself. That remains clearly with the FA.

"However, when public funds are committed to a project, government do have a responsibility to ensure that proper standards are met to safeguard public investment and to secure the improvements to the management and governance of the project necessary for success. And that is what we are doing.

"We are insisting on 'best practice' public-sector standards. We need this to protect the taxpayer and the lottery player. But that should also reassure the market that this is a worthy project to invest in.

"Once these measures are in place, it is appropriate for us to meet some of the non-stadium infrastructure costs, and we have identified £20 million for that purpose. And of course we need to stay engaged with the project, to protect the public interest in the £120 million lottery grant made by Sport England.

"To turn to my second point, honourable and right honourable Members may have read much in recent days about the Tropus and James reports into the stadium project. These reports investigated alleged irregularities in the tendering and procurement processes and weaknesses in the corporate governance of the project in the period 1999 to the summer of 2000. These allegations make disturbing reading.

"That is why in December I set clear conditions that this project had to be cleansed before any further commitment from the Government. But I believe it is important that they are now considered in the context of progress since my Statement to the House of 19th December.

"These four conditions were: a full value-for-money assessment of the construction agreement to be undertaken by an independent assessor; that WNSL supply a copy of the James report to the National Audit Office; that significant changes be made to corporate governance; and that legally binding agreements for the financing of the stadium be concluded. I do not believe that there have been any new disclosures which add to the concerns previously identified.

"It is important to note that the David James report did not find any evidence of criminal impropriety. It did not recommend retendering the contract for rebuilding Wembley. So the most important question to be answered was whether the flaws identified had irrevocably damaged the project on grounds of cost, propriety or deliverability. The expert judgment suggests they have not.

"In December, I asked both the FA and WNSL to publish the James-BLP report. However, for legal reasons WNSL felt unable to publish it. A publishable version has finally seen the light of day. Much of this is history, but history from which we must learn. Changes have been made, particularly since December. I wish now to look to the future.

"In many ways, there has been as much improvement in the past five months as in the previous five years. Three conditions—assessment of value for money; the consideration of the relevant papers by the NAO; and the strengthening of project management and corporate governance—have broadly been met.

"I will not repeat what I said on those matters just two weeks ago, except to say that the Sweett report, the independent value-for-money assessment, is now in the Library of the House of Commons for any who wish to read the detail.

"It confirms that it is unlikely that retendering of the construction contracts would result in significant savings. However, I do wish to bring Members up to date on the question of financing.

"On 7th May, I informed the House that the lead bank had agreed in outline to proceed. The FA has since said that it expects to sign a 'heads of agreement' and exclusive mandate with WestLB, the lead bank, in the next seven days which will agree the overall financial structure of the project. It has said that it will then expect to complete all the financial contracts some time within the next 10 weeks.

"The bank is satisfied that it has access to all the information it requires, including the James and Tropus reports. The prospects are good, progress is promising, but the outcome is not yet certain. Accordingly, I will not give final approval on the Government's contribution to non-stadium infrastructure until a final report has been produced by Patrick Carter, after proper banking arrangements have been concluded and assessed.

"I am clear—as indeed is the Football Association—that the current negotiations represent the last chance for Wembley. Should a Wembley deal not prove possible, I would expect—as I indicated in December and ever since—that the FA would enter into discussions with Birmingham over its proposals.

"The FA has repeated its assurances that if Wembley fails to proceed, then it would look for other options; options which would include Birmingham.

"Birmingham's bid was and is credible. It has been examined by Patrick Carter and by the FA in good faith. However, the Carter report supports the view that Wembley would deliver higher revenues, hence the FA's declared preference. And the Birmingham bid is still only embryonic: planning permission for what is a green belt site has not been given; the detailed design has not be completed; final costings for the stadium have yet to be done; the business plan has not yet been thoroughly tested or backed by market research; and there remains a significant funding gap to be bridged. So moving the project to Birmingham is not a straightforward process with a guarantee of success. But if Wembley fails, Birmingham deserves the chance to make its case.

"I now want to clear one matter up. Some have mistakenly assumed that there is a secret agreement between the FA and Sport England to reopen the old Wembley stadium if the new project fails. This is nothing more than a misunderstanding of the staging agreement between Sport England and the FA. It is the security obtained by Sport England for the £120 million lottery grant. It could, in theory, allow Sport England to require the FA to stage events at Wembley for 20 years in the event of the project failing.

"In reality, the stadium would be very expensive to reopen, and would be increasingly substandard as a venue. The Carter report indicates that it would cost around £40 million for a quick fix to open the doors—a solution which would require a second, major refurbishment only five years later, costing tens of millions of pounds more.

"The FA made clear in its statement yesterday that reopening the stadium is only one of the options that might be available in the event of a failure to proceed with the new stadium. And given the cost, it is an unlikely option for the FA to choose. However, it is for Sport England and the FA to decide how, in the event of the project failing, the grant is repaid.

"I come now to my last point. Hindsight shows what a high-risk project this was. Lottery money is not about risk avoidance, though. It should be about risk management; and I accept that more work needs to be done with distributors on risk assessment.

"One possible solution is to involve the Office of Government Commerce in all high-risk lottery projects, to ensure full scrutiny of proposals before their approval. This has now been done on Wembley, and the OGC's report, in the light of changes made and proposed, supports the stadium plans. I intend to include this issue in the forthcoming consultation on the future of lottery distribution which I hope to bring before the House before the Summer Recess. It is important for the future of the lottery to get this issue right.

"One year ago, this project was flawed, tainted and unsustainable. Since then, the efforts of the FA and other stakeholders, working with Patrick Carter and his team, have yielded results in governance, transparency and the potential to attract financial support to a much more credible project.

"The money sought from government is still on the table. It forms part of the financial package and it will remain there while the present negotiations with the bank continue to progress to conclusion.

"There is some distance still to travel; and if my four conditions are met in full, the House can be assured that government support is being given to a project that will have demonstrated that it deserves it—a project that will benefit sport in England at all levels for generations".

My Lords, that concludes the Statement.