The Department for Culture, Media and Sport’s decision to provide additional public funding for the English national stadium project at Wembley is an example of well managed risk taking, Sir John Bourn, Head of the National Audit Office said today. The Department, working closely with Sport England, has thoroughly reviewed the project and taken appropriate steps to protect the public interest.
The aim of the project is to develop an iconic stadium for football and rugby league, which also has the capability to stage major international athletics events. If the project is successful, the stadium will be suitable for holding flagship events, make available a specified minimum number of seats to the general public, and be financially viable in its own right without the need for ongoing public subsidy. Any profits generated by the stadium will be used by the Football Association for the benefit of football. The project is scheduled for completion in early 2006 and is expected to cost £757 million, of which the public sector funders are providing £161 million.
The original public funding, a lottery grant of £120 million from Sport England (the largest it has ever given), was paid in full at the outset of the project and used principally to finance the acquisition of the existing Wembley stadium and business in 1999. Had the project not proceeded in 2001 after it failed to secure the commercial financing needed, Sport England would have been entitled to recover its grant but this would not necessarily have been straightforward.
Lottery funding was provided on the basis that the stadium would be capable of hosting major international athletics events. Concerns about the viability of the proposed design led to the removal of athletics from the plans for the stadium but provision for athletics has now been reinstated.
In April 2001 the Football Association approached the Department to request further public funding for the project, having been unable to secure the commercial financing needed. In September 2002, after a detailed review process, the Department concluded that the project was worthy of further support and committed £20 million of government funding. In reaching its decision on whether to provide additional public funds the Department, working closely with Sport England, took account of Mr Patrick Carter’s review of the project and also took assurance from work by the Office of Government Commerce and other external experts. The Department also considered the risks that the project will face as it moves forward and the mechanisms put in place to address the risk of, for example, the stadium taking longer or costing more than expected to build or the project’s viability being undermined by a shortfall in revenue.
In negotiating the contractual arrangements for the project, the public sector funders accepted that their interests would be largely subordinated to the senior bank since it was providing over half the funding for the project, compared with their 21 per cent. In the worst case, the bank would have first call on the project’s assets in the event of the project getting into serious financial difficulty. But for other circumstances, the public sector funders secured provisions which protect the public interest and which should be enforceable without compromising the viability of the project.