Gerry Steinberg MPIn the House...

Commons Gate

Progress on 15 major capital projects funded by Arts Council England (HC622)

Public Accounts Committee 10 Sep 2003

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SIR JOHN BOURN KCB, Comptroller and Auditor General, further examined.
MR ROB MORAN, 2nd Treasury Officer of Accounts, HM Treasury, further examined.

Examination of Witnesses

Witnesses: SUE STREET, Permanent Secretary and Accounting Officer, Department for Culture, Media and Sport, and MR PETER HEWITT, Chief Executive, Arts Council England, examined.

Q37 Mr. Gerry Steinberg (City of Durham): Mr Hewitt and Ms Street as well, would you agree that funding for the vast majority of projects, whether they are these projects or other projects throughout the country, depends first on forecast visitor numbers and, secondly, how many visitors are actually going to attend the projects once they have been developed? It is fundamental to whether they get the money or not. It seems to me, if you look at as early as page 2 in the report, that only five out of the 15 projects have actually achieved their visitor forecasts. I will not say that this Committee has been conned but, for example, where we have talked about giving the licence to Camelot in the first place where all the money comes from, they projected huge numbers of people who were going to play the lottery. In fact, they were not telling lies but it was not far off telling lies, as Virgin did when they tried to get the contract. The point I am trying to make is that they really exaggerate their visitor numbers to get the funding in the first place. Why is it so wrong on so many occasions and why do you not see that?

Ms Street: Perhaps I could take the point generically and Peter might want to add to it. I think it is a fair point. There are a number of well-documented instances, and the Dome is one, the Royal Armouries is another. I have got the scars. There are two issues about visitor projections. One is that they can be over-optimistic because naturally when people want to set up an innovative, exciting project they are full of hope, so that is a danger that we have to mitigate. Secondly, as with the Stockton Arts Centre, formerly the Dovecot, which I went to see a couple of weeks ago, you can achieve the visitor numbers but they do not spend the money that you were hoping, so the revenue is not there. It is a serious risk which we were not sufficiently alert to in the first tranche of lottery grants.

Q38 Mr. Gerry Steinberg (City of Durham): You had the perfect example; you mentioned it yourself - the Dome. Although the Dome was actually very successful in the numbers that it got, and that could not be disputed, the numbers that they said they were going to get, they nowhere reached that, did they? Let us take the Sheffield one. They projected 400,000 visitors a year and in fact there were 80,000. That is outrageous. They were telling lies really, were they not, to get the money?

Ms Street: I think the Sheffield one, as Peter mentioned, was the subject of an independent scrutiny but it did not bottom out the real visitor projections. The thing about the Dome, I guess, is that a number of these things were happening concurrently. What the department has done since the Royal Armouries is made clear in something called the White Book, which I will not bore you with, that we need proper sensitivity analysis, the worst case scenario, for visitor projections and it is a recurrent theme in my discussions with accounting officers that this has been a vulnerable point and we have to be far more prudent in the future. I do recognise it. I think we have put a number of very rigorous mechanisms in place but it is an art. When I went to Stockton what I discover now is that there is massive community interest again in this centre. The local authority have come back saying how much this is wanted, so again projections are quite positive.

Q39 Mr. Gerry Steinberg (City of Durham): Are you basically saying - and Peter said it earlier - that, for example, the first 15 projects were started in the middle nineties and they are the ones that are failing? Are you saying therefore that the ones that have been built recently have not got these problems, because I would dispute that and I am going to give you an example in a minute?

Mr Hewitt: Judging visitor numbers is difficult and I am sure there are other instances, and we will hear of one in a moment, but there is no question that assessing this six or seven years ahead of implementation is difficult. On the NCPM there is no question whatsoever that we got it wrong. I do not think they lied. I think there was a very serious analysis which got it wrong. Having looked at it, I do not think they were clear enough about what the product was they were offering to the public when they made the judgement about visitor numbers and that is where they got it wrong.

Q40 Mr. Gerry Steinberg (City of Durham): Where are the biggest audiences in the country?

Mr Hewitt: Do you mean geographically?

Q41 Mr. Gerry Steinberg (City of Durham): Yes.

Mr Hewitt: In the big conurbations, obviously. In London and the big cities.

Q42 Mr. Gerry Steinberg (City of Durham): In the main I would suspect that London would have the biggest audiences.

Mr Hewitt: Yes.

Q43 Mr. Gerry Steinberg (City of Durham): Do you compare the projections, for example, of what Sheffield was saying, with what would happen in London in, let us say? There is a pop music one in London, is there not? How many people go through those gates and how many people were the same in Sheffield? Do you compare? Presumably, if they are saying there are more people going to walk through Sheffield than through the one in London that is a load of rubbish because Sheffield is not a tourist centre.

Mr Hewitt: The market analysis which is carried out is always carried out with regard to catchment population. They do have sophisticated techniques whereby they are taking into account travel time, etc., and in the case of Sheffield will always be carried out in relation to Sheffield. They will also look at comparable cultural facilities of one type or another in a different part of the country or indeed in a different part of the world. One of the problems with the National Centre for Popular Music was that there was not one and there still is not one. It was a completely unique facility.

Q44 Mr. Gerry Steinberg (City of Durham): But not for Sheffield basically. It was the wrong place, was it not? I have no objection to it being built but it was built in the wrong place.

Mr Hewitt: I am not sure about that. At that time the reason why they built it was that in the 1990s Sheffield was a very thriving pop music centre. That was one of the big centres of the country. It was ahead of Manchester; it was ahead of Tyneside; it was ahead of London. They had a cultural centre in Sheffield with a very popular dimension to it and they saw this as adding to that overall programme of popular culture in Sheffield which was flourishing at that time. There were some good reasons for having this in Sheffield.

Q45 Mr. Gerry Steinberg (City of Durham): Okay. Two projects have cost £24 million to build in terms of grants. They have actually cost a lot more because that was just the Arts Council's contribution. That is basically £24 million down the drain, is it not, which could have gone elsewhere?

Mr Hewitt: You are referring to the popular music centre and the Dovecot?

Q46 Mr. Gerry Steinberg (City of Durham): Yes.

Mr Hewitt: I would not accept that it is £24 million down the drain. I would certainly accept that in the case of the National Centre for Popular Music our £11 million is not realising what we hoped for originally. There is an alternative use of an educational nature but I absolutely accept that that is not the same thing. In the case of the Dovecot we have worked hard to bring the Dovecot back into being. It has now re-opened with a new board, a new chief executive, a new business plan, and it has put in place a number of pilot events in the spring and summer which have worked very well. We are very confident that that has a positive future.

Q47 Mr. Gerry Steinberg (City of Durham): Let me just make a point. Seven out of the 15 projects have had financial difficulties, have they not?

Mr Hewitt: Yes.

Q48 Mr. Gerry Steinberg (City of Durham): Seven out of the 15 projects have had financial difficulties and one other, which is so important to me, is the Gala Theatre in Durham which was a £12 million grant by the Millennium Commission, a £24 million project and had great problems, lost a lot of money and at one stage looked like it was closing. The point I am making is that I have no objection to these being built at all. In fact, they are great, but I am not so sure I agree with the argument that they should not be funded afterwards, that they should stand on their own two feet. I do not think they should be subsidised to such an extent that it is coming from the taxpayer all the time, but where you do have these facilities, - for example, Durham, where we have never had a theatre before, have tried for 30 years to get one, we get one, the fact is that it is well attended, the audiences are always packed and yet it is making a huge loss, - what is wrong with them being subsidised by yourselves?

Mr Hewitt: I would need to look at the business plan for that particular facility and I would be very happy to ask our north east office to have a look at it.

Q49 Mr. Gerry Steinberg (City of Durham): It is a general principle I am putting. It is not such a great crime, I do not think, if they are subsidised. We should not throw money away and, for example, with the Sheffield one it was clear that you could not have continued that because there was nobody going in to see it, but where you have genuine ones that are very successful but still not profitable, I think that there should be some sort of fund which helps these.

Mr Hewitt: I absolutely agree with you: there should be a fund for theatres of that nature.

Q50 Mr. Gerry Steinberg (City of Durham): Oh; good.

Mr Hewitt: Can I add one thing on visitor numbers? We have talked about the difficulties of visitor numbers. In overall terms, looking at these 15 projects, if you put the National Centre for Popular Music to one side, overall visitor numbers are 5% higher than were targeted for. It is not that bad a story. Five million people went through those projects in a single year.

Q51 Mr. Gerry Steinberg (City of Durham): If that is the case why is it that certain projects do get extra funding, considerable extra funding, and other projects do not get that extra funding? How do you make that decision and is it not unfair that you can pump £22 million into Sadler's Wells to keep it going in the capital but my little theatre in Durham, which was struggling for about half a million pounds, could not get that?

Mr Hewitt: I do not know the detail of the case. I would be very happy to take that up with my colleagues in the north east because they must have looked at it and come to a view on it. We will look at the viability of the project, we will look at the local authority contribution to the project, we will look at audiences for the project and we will give money absolutely; we will subsidise theatres of that nature. I am afraid I do not know the detail of that particular case but I am very happy to look into it.

Q52 Chairman: Some would argue that the answer to that question is that the opera lobby in London is much more powerful than any other lobby.

Mr Hewitt: My answer to that would be that from the Arts Council's point of view we have devolved almost all our decision making on revenue grants to projects of this nature to regional level in the last couple of years. Therefore, decisions have been taken regionally throughout the entirety of the country and therefore lobbies like that should at least be -----

Mr. Gerry Steinberg (City of Durham): What you are seeing is Gateshead getting all the money.

Q53 Chairman: Just to round off Mr Steinberg's interesting line of questioning, there has been discussion of the Royal Armouries and of the National Centre for Popular Music in Sheffield. There are political imperatives for putting national centres out of London; we understand that, but you are not interested in those political pressures in your particular position, are you? You are interested in maximising audience numbers and ensuring value for money. Are you telling us that you are going to resist these pressures in the future if somebody calls for a national centre somewhere outside of London?

Mr Hewitt: No, not at all. We were persuaded, for example, that the National Glass Centre should be developed in Sunderland. We were persuaded that the National Centre for Popular Music should be developed in Sheffield, and we will be persuaded in future that other national facilities should be developed outside of London. We are very keen to work with regional colleagues to ensure that there is the greatest possible spread of cultural facilities throughout the country and that includes national facilities.


Q139 Mr. Gerry Steinberg (City of Durham): We shall be watching very carefully to see that no money goes to Middlesbrough Football Club. I am not sure I got an answer when I pursued this before. It says in the report that 7 out of the 15 projects have financial problems. How many projects are there throughout the country, approximately? Do you know? There must be hundreds.

Mr Hewitt: Hundreds of thousands.

Q140 Mr. Gerry Steinberg (City of Durham): Big ones?

Mr Hewitt: It depends on your definition.

Q141 Mr. Gerry Steinberg (City of Durham): How many of these projects that have been developed from Lottery money have financial difficulties? Do you know?

Mr Hewitt: A relatively small number. In many cases, the original hope and expectation that a new facility, a better facility more attractive to the public, would draw in more income has proved to be the case. I would add that of the five projects that are referred to in this report that have financial difficulties there is no doubt whatsoever that over the last six to nine months, at least in the case of four of the five projects, their circumstances have improved quite significantly. We are on an upward trajectory there.

Q142 Mr. Gerry Steinberg (City of Durham): If you look at page 24 of the report, paragraph 3.7, it tells us that as well as giving some projects grants you also give some projects loans, so some projects get a grant; some get a loan; some get both; some get neither. How do you make this decision? How do you decide who gets what?

Mr Hewitt: We decide on who gets grants according to criteria that are laid down. In the case of supplementary capital grants, the criteria are referred to in paragraphs 3.2 and 3.3, where we lay out the circumstances where we give a supplementary grant. We will give a loan only where there is a very specific cash flow problem that a project experiences where some short term assistance from the Arts Council will see it through that cash flow difficulty. The instances that are referred to here are of that nature. There are different circumstances for grants and different circumstances for loans.

Ms Street: Could I put a few numbers forward on the original question, if it helps? In the first tranche of capital programmes, there were 1,870 projects. 1,813 of those did not need extra help. It follows that 3% did and 97% did not. They required big slugs of help. I am not saying it was not serious money; it was, but I think that perhaps puts a bit of a context on it. Most of those projects that did require help are delivering their benefits. While I have the floor, I want to put on the record that I think it is a demonstration of Peter Hewitt's grip on this that we have, both of us, accepted and acted on all the recommendations in this report, which we found very constructive.

Chairman: I am very grateful to Ms Street and to Mr Peter Hewitt for coming here this afternoon. You were asked by Mr Bacon about luvvies. Surely one of the answers is that the great impresarios of the past were great artists but they were also very shrewd businessmen who knew that there was not an Arts Council waiting to bail them out. What this Committee is worried about is whether the people you are dealing with really are aware that you are sufficiently tough minded to pull the plug if it is necessary. You have given various reassurances this afternoon which we will look forward to considering in our report and I am sure that the successor committee to this will look forward to considering your reassurances, particularly on Sadler's Wells, and on dealing with the cost over-runs. You have given some very specific assurances to this Committee and we will hold you to those assurances.

Mr. Gerry Steinberg (City of Durham): That is all well and good, Chairman, and I agree with most of what you say but there is also the problem where there are some really good projects that are not making a profit but are so worthwhile and have been run quite well. It would be a disaster if the plug was pulled on those because the Arts Council did not give them extra finance.

Chairman: With that caveat to my comments, I will close the meeting. Thank you very much.

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