With permission, Presiding Officer, I would like to make a statement.
As members will be aware, Queen's Park Football Club and its subsidiary, the National Stadium plc, have run into serious financial problems carrying out major redevelopment works at the stadium. I am pleased to announce to Parliament that we are very close to reaching final agreement on a detailed rescue package that will secure not only the continuation of the project with all its aims and objectives intact, but the survival of Queen's Park, Scotland's oldest football club.
Although the problems are in no way attributable to the Scottish Executive, because of the importance of Hampden to the nation, the Scottish Executive has taken on a key role in finding the solution. The redevelopment of Hampden is a flagship millennium project—one of the largest to be funded by the Millennium Commission in Scotland. The Scottish Office was a minor funder of the project; its decision to contribute £2 million was taken in 1996 when the Conservative Administration was in power.
I announced on 14 October that broad agreement had been reached on a rescue deal but I emphasised that further detailed work and complex negotiations were required before the problems could be fully resolved. That has proved to be the case. The rescue deal is still subject to finalisation of some detailed points and completion and execution of legal documentation. I urge all the parties to permit no further delay in bringing matters to a full and final conclusion. I am very pleased, however, that a stage has been reached at which I can make a substantive statement to Parliament before the recess.
In my statement, I will give as full and frank an explanation of the background and outcome as I can. I shall do so within the constraints placed on me by contractual obligations to maintain confidentiality and by a proper regard for the legitimate commercial interests of the private companies involved.
Although the Scottish Executive and the other co-funders have played a key role in securing the deal, the co-operation of other parties, including
Hampden stadium and adjacent land is owned by Queen's Park FC. Through agreements with the Scottish Football Association, it has been Scotland's national football stadium for nearly a century. It was a condition of Millennium Commission funding that a subsidiary company, the National Stadium plc, was set up to manage the redevelopment project and operate the stadium.
On completion of the redevelopment, the facilities will comprise a stadium suitable for football and other purposes, office accommodation, a football museum, a lecture theatre, conference and catering facilities and an all-sports injury clinic.
The original estimated cost of the project was £51 million. The Millennium Commission was the major funder, with a grant of £23 million. The Scottish Office contributed £2 million over three years channelled through sportscotland's grant in aid. Other public funders were the Scottish Sports Council, which contributed £3.75 million of lottery money, the Glasgow Development Agency, which contributed £1.6 million for derelict land clearance, the Football Trust and the then Strathclyde Regional Council and Glasgow District Council.
A management contract between Queen's Park and the principal contractor, McAlpine, was entered into and the construction works began in February 1997. Work completed to date has cost some £60.6 million. The estimated final cost is £65.7 million if all the planned works are carried out. However, the work to be completed includes works that are not essential to enable the stadium to operate fully and works relating to the Scottish football museum for which responsibility lies with the SFA Museum Trust, not the project.
The debenture scheme was launched several months behind schedule in November 1998. That did not generate the income expected for the project, being only one third taken up before it was relaunched in advance of the recent Scotland versus England game.
The project managers were successful in attracting commercial sponsorship well in excess of their original target, but that was still not enough to cover the additional costs incurred.
The cost overruns on the project have three main causes: extra costs on agreed project items
When the Millennium Commission alerted the Scottish Executive to the present problems in late July, Queen's Park FC already owed to the principal contractor money that it was unable to pay. Having considered financial information supplied by the club and National Stadium plc, the co-funders concluded that they required an independent financial and technical assessment of the project before they could properly consider whether further financial involvement in the project was justified. The consultancy team comprised firms of quantity surveyors, accountants, management consultants and solicitors.
The purpose of the assessment was to enable the co-funders to understand how the problems had arisen, to establish or verify their full nature and extent and to identify possible solutions. In essence, we found that the project management had become product-driven rather than cost-driven. Insufficient attention had been devoted to securing the resources required to complete all the works.
On the basis of the consultants' interim findings, the co-funders agreed to move towards a work-out solution to the problems, within which they would contribute to a rescue package, subject to certain terms and conditions. The five main co-funders—the Millennium Commission, the Scottish Executive, Glasgow Development Agency, sportscotland and Glasgow City Council—were willing to contribute up to £4.4 million to the rescue package, subject to due diligence and the necessary approvals. The Scottish Executive is committed to contributing £2 million to the package.
The £4.4 million fell some way short of bridging Queen's Park FC's deficit on the capital component of the project. After proposals were put to Queen's Park FC and National Stadium plc, it was necessary for a complex process of negotiation to be undertaken with other parties that had a financial interest in the project, who might be able to contribute to the achievement of a rescue package. They included the two companies' creditors, in particular the main contractor, McAlpine, and the Royal Bank of Scotland.
Two main conditions were attached to the co-funders' further financial contribution: a new management structure for stadium operation and a viable long-term business plan for the stadium. The co-funders considered that major changes in the arrangements for governance and management of the stadium were necessary to secure viability in the longer term. They were
The fact of the matter is that Hampden is not the national football stadium without the involvement and co-operation of the SFA. It seemed to the co-funders to be both logical and appropriate that the SFA be asked to take on a direct role in the management of the stadium.
I will detail the key elements of the rescue package. McAlpine has accepted a settlement that involves a cash payment of £3.4 million and debentures which would cost £1.4 million to buy. The co-funders will meet the cash component and Queen's Park FC is giving the debentures from a stock that had not been offered for sale to the general public. We are in the final stages of concluding agreements with other parties to ensure that the funding gap on the construction phase of the project is bridged. I am sure members understand that these are very sensitive negotiations, but they represent the last part of the process.
The remaining £1 million of the co-funders' money will be paid to the Royal Bank of Scotland. That will reduce Queen's Park's indebtedness to the bank to a level that can be accommodated within the new management arrangements. The bank has agreed to convert its underwriting of the debenture scheme, which was due to expire in March 2000, to a term loan to Queen's Park. The bank is also co-operating in other ways that are essential to ensuring an orderly transition from the present arrangements to the new management set-up.
The SFA has agreed to take on responsibility for the future management of the stadium under a lease granted by Queen's Park. The lease will run for 20 years, with an option on the SFA's part to extend it for a further 20 years. The level of rent payments will enable Queen's Park to pay off outstanding debts and derive an income to help meet its running cost requirements. Queen's Park will continue to own the stadium and adjacent land.
There will be a reciprocal rights agreement between the SFA and Queen's Park, which will enable Queen's Park to continue to use the main stadium for matches and other purposes and the SFA to make use of Lesser Hampden for squad training and car parking when major matches are being staged in the main stadium.
The co-funders' consultants examined carefully the viability of the stadium operation in the longer term. The co-funders were satisfied, as a result of that work, that there was a viable business there, so long as it did not have to service an unduly high level of debt incurred on the construction phase of the project. The work persuaded the SFA, which carried out its own due diligence, to accept, in principle, responsibility for managing the stadium.
In taking on a full repairing lease, the SFA is, of course, accepting the operational risks and liabilities as well as the potential rewards. Responsibility for drawing up and implementing a business plan for the stadium now rests with the SFA. Despite the mistakes and misjudgments that have been made by the project—which are not attributable to any one person—we now have a magnificent national football stadium with excellent facilities on the south side of Glasgow.
Hampden is there: it is virtually complete and it is operational. It has just received the accolade of being allocated the final of the Champions League, in 2002. I am hopeful that the rescue deal will be concluded this week. If that is the case, it will maintain the historic relationship between the oldest club and Scottish football's national governing body. It will be a different relationship, but once things settle down, I hope it will be a better relationship. It will allow Queen's Park to continue to uphold the amateur principle within senior level football.
We now need to move forward. As we enter a new millennium, we want to see confidence in the project restored. We want everyone in Scotland to see that we have a national football stadium of which we can be rightly proud. I commend this statement to the Parliament.
Does the minister think that it has been acceptable for the Executive to proceed in this matter by way of continual briefings to the press, while refusing—as his deputy minister did on 9 November—to give even the most basic details to the relevant parliamentary committee?
Secondly, I turn the minister's attention to his responsibility for public money and put on record the Scottish National party's support for the national stadium. For that reason, we welcome this belated statement. Can he say why public money was committed at the outset to a project that did not have a fixed price—unlike the Millennium Stadium project in Cardiff—and did not even cover basic items such as inflation and the relaying of the pitch? Can he say why he is now prepared to commit even more public money which, whether it comes out of the education budget or end-year flexibilities, is still money that can now not be committed to education? Why is that money being committed without any real
Is the minister seriously suggesting that by handing over the management of the national stadium to the Scottish Football Association, the public will be confident that the financial chaos of the past will not recur in the future?
Even for the SNP, that was a super-girn. Ms Sturgeon must stop making wild accusations that are completely and utterly untrue. She has made a great fool of herself over this, on several occasions, and she is doing it again. She asked why we gave a press briefing. I am renowned for never giving off-the-record briefings to the press. On the issue of Hampden, I am renowned for saying nothing to the press—or anyone else—on my behalf or on behalf of the Scottish Executive.
Ms Sturgeon obviously thinks that I am lying and she must be able to justify that. That is a serious accusation, Presiding Officer. I hope that she will see fit to withdraw it. I have been very circumspect and have not released any information. These have been extremely difficult and detailed negotiations, involving many people. It is not appropriate to give a running commentary on them. This is not about achieving headlines, it is a serious matter that must be dealt with carefully.
Ms Sturgeon also asked why money was originally put into the project. As I pointed out in my statement, that was not done by the Executive, but by a previous Administration, in 1996. She may wish to pursue the question in that respect. We picked up the situation—a stadium was being built and there was a deficit—and we had to deal with it. She has again made a great fool of herself over the question of where the money is coming from. Again she has made the wild accusation that the money is coming from education funding. Let me reassure the chamber that the money did not come from my education budget. I can state that categorically. The money was added to my budget in September from savings that were made across the Scottish Executive budget. I hope that I will receive an apology for yet another wild accusation in due course, but I will not hold my breath.
Ms Sturgeon's final question related to the SFA's management of the project. We put in money to save the project; if we had not done so, Queen's Park Football Club and the stadium would have folded. If the SNP wants to save the project, it must accept the consequences of that—we had to put in money. We were prepared to put in further money only if there was a viable business plan—there is—and the management was sound.
More than 50 per cent of the business plan is dependent on moneys from the SFA, so it is correct and appropriate that the SFA should manage the national stadium. It has expertise in the finance and marketing department. Chris Robinson is taking a particular interest. The SFA is setting up a wholly owned subsidiary and is seeking out someone from the commercial sector to run it.
I am confident that the arrangements we have put in place are correct. We have saved the national stadium—the Scottish National party seeks to destroy it.
Does the minister agree that the directors of Queen's Park Football Club have displayed only too well their adherence to the amateur principle in their approach to the development? When he says that extra costs for the project have been agreed as a result of increased specifications, can he tell me who agreed and why? Who agreed to the additional works that were not part of the original project and which were not agreed with the co-funders, and why? Can he tell me who agreed to meet the accelerating costs of the Scottish cup final in May—not part of the original development time scale—and why?
In answering those three questions, will the minister tell us to what extent there was any monitoring that might have picked up on those costly decisions?
Given the amount of public money that has been put into this redevelopment project right from the beginning, and taking into account this rescue package, what does the minister think about the public taking an equity share in the stadium, which might allow a future flotation to recover some of the public funds and give the public a true stake in the national football stadium of Scotland?
Not the ideologue, he says.
Mr Monteith raises a number of issues. I do not think that it is helpful to look at the past to find who was responsible for what went wrong. Mistakes were made and all may not have been as well as it should have been, but no one individual can be blamed—boards were involved.
Strict monitoring procedures were in place for our contribution. I cannot answer for the Millennium Commission—which is not our responsibility—or for others. Our money was all channelled through sportscotland, which received monthly updates of financial returns, and which visited the site regularly and received various certificates. We had very strict and tight controls over all those matters. There was no suggestion whatsoever of anything going wrong until the Millennium Commission pointed it out in July.
We now have a national stadium—it is up and it is operational. It is best if we now look to the future.
I should declare an interest: I am a tenant of Queen's Park Football Club, as my constituency office is there. I welcome the statement and the fact that the national stadium can now go ahead with some certainty. The minister mentioned the wholly new body that has been set up to manage the stadium under the auspices of the SFA. How will the Executive oversee the money that has been put in? Will there be a representative from sportscotland on that board, or whatever executive body is formed? Will other organisations—including Queen's Park Football Club and, of course, the SFA itself—be directly represented so that they can look after their own interests? What will be the form of the new body?
As I pointed out, the agreement with Queen's Park is that it is leasing the stadium to the SFA, which will pay the club an agreed amount under the lease arrangements. It will then be entirely up to the SFA to manage that. Who it will have on the board is still a matter for discussion between the SFA, ourselves and others.
The minister has just stated that he was first aware of the problems when the Millennium Commission drew them to his attention in July, but that he was happy with the monitoring that was going on. Can he explain why the December 1998 accounts for Queen's Park Football Club did not alert him to any problems? How many times have he, his deputy, Rhona Brankin, and other ministers, been guests of the SFA at football matches? Were they guests during the period of negotiations for this rescue package that has put the SFA in the management position?
I am not quite sure of the basis for that question, but I think that it is a nasty one. Have I been a guest? I can give a definite answer, because the records are all kept. I was certainly a guest at the Lithuania game, when I briefly discussed with the SFA the issues surrounding the national stadium, which I thought it was right and appropriate for me to do as I had responsibility for
Will the minister explain why he was not able to give a briefing to the Education, Culture and Sport Committee on this matter prior to his statement? Given that he has said that agreements have yet to be finalised, will he assure the committee that he will attend the committee after the recess and answer any questions, if that is necessary?
I will be delighted—as always—to come along to the Education, Culture and Sport Committee and be questioned on these matters. That is an important part of the democratic process.
Negotiations are still continuing on the final details of the rescue package. I want to give the committee the fullest and most up-to-date information, which is why I have not been able to attend before this.
The consultants will provide us with a contract round-up letter, which will be a very detailed account of the situation and take into account the issue of commercial confidentiality. I will ensure that the committee receives a copy of that letter.
The minister explained that the Government's monitoring has been adequate and correct, but the net result has not been adequate and correct. Does he plan to review how this affair has been conducted, both by the previous Conservative Government, which started it, and the Labour Government at Westminster, which continued it? We need to learn from this situation, as other projects not far from this chamber are in development. Consistently overspending on such projects is not good news for anyone.
We will certainly want to review our monitoring arrangements to find out whether we could have detected signs of trouble. Our monitoring arrangements were very strict, with scrutiny of monthly financial returns and regular visits to the area to see what was happening. No signs of trouble were detected. The financial controls were good and the budget was still being kept to. We are always open to reviewing and monitoring our procedures to find out whether we can improve them.
Bearing in mind that many millions of pounds of public money, including lottery money, has gone into the Hampden project, will the minister ensure that the Royal Bank of Scotland is not allowed to hold the
The basis of legal agreements is that no one holds anyone to ransom.
One of the reasons for the financial problems at Hampden is that two thirds of the debentures have not been sold. I hope that Mr Canavan is not suggesting that we pick up private companies' debts. That would be ridiculous.
I thank the minister for his statement. Although it is unfortunate that the stadium ran over budget, I welcome the fact that the Executive has recognised its role to find money to save the project. All parties should agree that that was the right thing for the Executive to do.
Will the minister clarify the Executive's role in monitoring the project both up to the moment it became aware of the crisis and in future?
As the Executive was not established until July this year, when people became aware of the deficit, it had almost no part in monitoring the project; sportscotland and previous Administrations have laid out their various monitoring mechanisms, which we will certainly want to review to find out whether anything could have been detected sooner.
I hope Mr Galbraith will not use the word "nasty" about me. SNP members have not had much luck up to now; every time we have asked a question, he has given a negative answer.
I want to reassure Mr Galbraith that the SNP has always been and will always be in favour of Hampden and I look forward to the retraction of his lie that the SNP did not support the project. [MEMBERS: "Ask a question."] I will ask a question in two seconds. As members of a democratic party, we have the right to ask questions about this project.
I will. How will the deal satisfy the strict rules imposed on local authorities by the Accounts Commission, which demands a distinct landlord and tenant? At Hampden, the SFA has been allowed to act as both landlord and tenant. Does the Labour Executive choose to ignore the rules that it imposes on other bodies? I hope that Mr Galbraith will not give me a nasty answer.
I am a delightful chap who always likes to give nice answers even when people rant at me. The lady keeps saying how much the SNP is in favour of the national stadium, but every time one of its members speaks they give the distinct impression that they are against it. The SNP complains about everything and does everything in its power to break it with questions about why we are putting money into the stadium, why we are doing this and why we are doing that. My goodness; if SNP members are in favour of the stadium, they might show it a little bit better.
The arrangement that has been agreed is legal and above board. No one has anything to be ashamed about.
The minister will be well aware of my view that public money could have been used more productively to finance and promote football in ways other than building a new national stadium. However, the stadium having been built, is the minister completely satisfied that the rescue package, which I know to have been the product of tortuous negotiations, is robust enough to be sustainable in the longer term?
My friend raises the rights and wrongs of the national stadium. That argument raged for years. All of us have different views, but we need not consider them now. The deed is done. The stadium is there and it needed money. We had to pick it up at that stage.
Tortuous is a euphemism for what we had to go through in the negotiations to arrive at this rescue package. The stadium is robust, the business plan is sound and the management arrangements are in place. I look forward to the national stadium having a good future.
I am glad to agree with Ian Welsh. Although the matter is not up for debate, it is worth putting on record that the money would have been better used improving facilities throughout the country, instead of building another national stadium in Glasgow. Is the minister convinced that the business plan is viable and that it will ensure a commercial return within a reasonable time scale? I see that the minister is nodding, which helps me to ask my second question. If he is convinced that the agreed business plan is commercially viable, does he agree that it would be a better use of public money if the Executive agreed to a long-term interest-free loan, on the basis that the money could be returned once the business plan is able to achieve a return?
The member must realise that there are two distinct issues: the £6 million owed to Sir Robert McAlpine, which must be found now, and the fact that we were not willing to put in additional public money if the business plan was
Whether we need a stadium is water under the bridge. We picked up the stadium with a deficit. We had to deal with the issue, which we did as best we could.
I congratulate the minister. I am happy that Queen's Park FC, which has a long tradition, will continue. I am happy that the stadium has been completed and I hope that it is a stadium of which we can be proud. I am also glad that everybody is now co-operating in trying to get a solution. However, given that the Executive and sportscotland have invested public money, does the minister recognise that questions will be asked about other aspects of football in Scotland? Does he agree that, as well as funding a national stadium, he must consider the plight of football clubs such as Dumbarton, at the grass roots, which should also be supported?
Many problems face football. Most of the solutions rest with the governing bodies and the football authorities. One thing on which I can assure Ian Jenkins is that the funding package in no way affects either our commitment to the proposed youth academies or the money that we have already contributed.
I have always considered that two things have to be done—not just in football, but for all sport. First, we must ensure, by funding excellence in sport, that everyone realises their potential. Secondly, we should build up a large base of youth sport from which future champions can be generated. That raises awareness and more folk are in turn drawn into the base—it is a virtuous circle, which is good both for sport and for the health of individuals. It is also good for the nation.