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Edwina Hart Statement on the future of the Wales Millennium Centre     

On behalf of the First Minister and the Minister for Culture, Sport and the Welsh Language I am today making a statement on the future of the Wales Millennium Centre in view of the significant financial implications posed for the Assembly if there is agreement to support this project. You will have seen the supporting paper circulated earlier this morning. I apologise that this issued later than I had hoped, but Members will understand that there were important technical issues to be resolved. The statement sets out in detail the position of the project, the legitimate concerns that have arisen about it and our proposals to enable it to proceed on a sound footing.

Once these financial matters have been resolved, the future of the project will clearly be for the Minister for Culture to progress.

Because of my previous involvement with the WMC, as Finance Minister I have only become engaged with the project very recently and after the First Minister's statement last October. In accordance with the principles of financial accountability, propriety and regularity that the Assembly upholds, I made a full declaration to Members of my interest on 23 January 2001.

I also wish to point out that if it were not for the existence of the National Assembly, the consideration of this issue could not be conducted in such an open and democratic way. The fact that full details of this project have been put before you -and the public - and can be debated, is evidence that the Assembly has made a real difference through introducing more open decision making and better accountability.

Since the First Minister's previous statement last October a great deal has been done and good progress made. Officials here have worked closely with the WMC to bring the project to the point where we can now have a much clearer - but still not fully definitive - view of the risks and benefits involved.

The key issue we have to face is clear.

We have to decide whether the project is of such importance to the cultural life of Wales, to creative industry here, and to the country's international profile that the price - £92 million, or £100 million including land and car park costs - is worth paying. We have to do so at a time when the pressure on the Assembly's resources are intense and growing.

Before I go further, I want to welcome the news that Sir David Rowe Beddoe has taken over the Chair of the WMC.

On behalf of the First Minister and the Culture Minister it is appropriate that I pay tribute to his predecessor - Sir Alan Cox. There is no doubt that without Alan's initial vision, his drive, his determination, and unfailing commitment to the project since its inception some five years ago, it would not have reached the point it now has,

We wish him well. It is a tribute to Alan's legacy that someone of David's standing is willing to take the Chair. The Board, and we, can have the greatest confidence in him.

I can confirm that the work commissioned to bring the project design to the serviceable Stage D is complete. This now detailed design represents a critically important step in the process of nailing down the parameters of cost and risk. A summary of the technical appraisal of this work that was carried out by Francis Graves Ltd - who were our project monitors throughout the period - will be made available as soon as the commercially sensitive issues have been dealt with and any other matters resolved.

That process extends to deciding on the type of procurement method to be used.

The WMC has lately favoured construction management. Under this approach there can be no certainty about the cost of the project. All risk of overspend, for whatever reason, would remain with the project itself. As Sir Alan made clear at a recent Subject Committee hearing, it would fall to the Assembly to underwrite those risks.

In October, the First Minister was very clear that we should look for 80% cost certainty at the start of the scheme. Today, I cannot give Members a firm assurance that we have cost certainty for the bulk of the project. What is more, the risks of proceeding without the necessary controls are too great. The project simply cannot go forward on the basis of an Assembly blank cheque.

Frankly, were this project to start under construction management terms, it would be extremely difficult to resist demands for further funding. We could be signing up to a level of capital support amounting to £37 million at least- but with no limit to our financial exposure.

Against this background, I am pleased to confirm that the WMC Board has itself come to the conclusion that it should apply a fixed price contract approach to procurement forthwith.

Against the core £92 million cost estimate for the project- which our advisers consider to be a realistic and achievable price - the WMC has secured in commitments or cash £55 million. I believe that the £4 million in European funding is now all but lost - time expired because of all the work needed for redesign and to complete preparatory stages properly.

Taking all this into account, the aggregate funding shortfall amounts to £25 million.

The WMC's hopes of raising funds from other sources are ambitious. It might be more realistic to think in terms of a target for private sector sponsorship at £4 million rather than £8 million, and for capital allowances at £5 million rather than £7 million. But even then there is a risk that the funds will not materialise. There is also a discussion to be had with the Millennium Commission about whether they might be to release further funds for the project. We have assumed £3 million - we must test them further on this figure.

However, like my colleagues, I regard the project as promising tremendous benefits for the cultural future of Wales; for the generation of creative industry; and for the promotion of cultural tourism from the rest of Europe, and beyond.

It brings with it substantial funding from the Millennium Commission, the Arts lottery, and other public and private sources - money that will be of great help in tackling the resource problems that confront the WNO and Diversions, for example, and might otherwise be a call on us. Ending the project would mean that Wales would lose the benefits of these Lottery funds and some £11 million of funds already expended would have been for no purpose.

The Centre offers a blend of artistic ingredients that has no counterpart anywhere else in the world, together with worthwhile economic and employment benefits, that won't just be confined to the Bay.

In all, there is a strong case that the increased price is worth paying - so long as it is subject to a genuinely disciplined control regime to contain risks strongly, and manage costs down. Thus from the financial point of view, I am content to commend the project to you in principle, subject to certain conditions.

First it is essential that the WMC adopt a procurement method based on a fixed price contract which has now been done but there will inevitably be a modest delay to test the market - which itself could be used productively to finalise project planning. The associated support cost to keep the WMC in business in the run up to construction would be £2 million. This is not an insignificant sum and when the bridging arrangements for the AMEC settlement are taken into account, the total bill would be almost £3m.

Second, the Board and the Executive needs to be reshaped and augmented so as to suit itself to handle the capital development phase. I know that David Rowe Beddoe is particularly concerned to work with the Board to achieve this. There must also be practised support at staff level so as to manage the project in a way that complements the Chief Executive's talents on the cultural and operational front.

Next we have to face the fact that the result of testing the market under a fixed price contract could result in tenders above what is affordable.

If the project price were to exceed £92 million - if the implied Assembly contribution were to fall outwith the assessed range of £25 - 37 million - then it would not be affordable, and could not proceed. If cost certainty consequent on a fixed price test showed a project cost of over £92 million then this would automatically mean that the WMC will not go ahead.

We should not be prepared to enter any arrangement where our commitment is not fixed, and today I am setting the limit clearly for everyone to see - you, the industry, and the WMC itself. They must all take note.

There is one technical issue to which the paper draws your attention - the adjudication between the WMC and AMEC. Assuming that the project were to proceed on the basis I outline today then the outstanding claim - some £900k with a short term demand of £180k - will need to be met. My view is that the costs should indeed be borne by the WMC - but not from the public funds invested in it, even though there could well be a requirement for some bridging arrangements in the short term.

Next I turn to the operational phase - post-construction. The WMC is not just about delivering a landmark building to time and within budget. It must also operate successfully, both culturally and financially.

Delivering the Plan will be challenging. In the past the WMC Board has taken the view that the Centre will operate without public subsidy. But we cannot take that assessment at face value. We commissioned PriceVVaterhouseCoopers to review the plan and a summary will be made available once the commercially sensitive issues have been dealt with and any other matters resolved. And you will be aware of the debate at the Culture Subject Committee when the WMC was questioned about the Business Case recently. The Committee was robust and tenacious in its approach and helped to highlight just how challenging achieving the Business Plan is, as well as a number of operational issues that still do not appear to have been fully resolved.

So, there remain real concerns about it. Will the Centre be able to sustain over 400,000 theatre attendances annually? Are the occupancy rates of 70% for 300 performances every year achievable? Will a further 350,000 people visit the Centre as projected? If audience numbers fail to match expectations, the Centre will immediately run into a deficit.

The WMC have acknowledged this indirectly by indicating that a programme of national and international quality would require public subsidy of £750k annually.

There is also the advice from Arts Council which suggests that support amounting to some £800k will be needed to enable the Residents as planned. The Council hasn't the resources to provide for this, so again the additional funds would have to be found by the Assembly. In addition, provision for ongoing maintenance appears Iow and to establish a realistic fund could cost a further £500k per year. It is also worth noting if audience numbers were to fall below expectations the Centre would lose income which, if corrective action was not successful could become a recurrent problem.

Last we have to take account of the reasonable desires of artists right across Wales to contribute to the success of the Centre - and to grow and flourish where they are too. This means that we must consider increased provision for the arts elsewhere in Wales. The WMC cannot be allowed to operate at their expense: it will need their product.

We must give the Centre a genuine chance to succeed. So we must also be realistic about the potential call on us for revenue funding over the years ahead. Taking all these issues together, then in one way or another we must be prepared to contemplate a revenue cost of some £3 million direct to the WMC, and a broadly equivalent sum to cover the complementary implications elsewhere.

So to clear the way for the project to go ahead, and to consider the impact of the WMC more widely, the Subject Committee will be invited to consider this assessment about the level of risk on revenue subsidy and to be reassured that it makes reasonable sense. I know that David Rowe Beddoe will want to keep the Subject Committee informed about the steps he will be taking to re-base the project as well. In summary and in principle, I believe that we can give the green light to the project provided it meets the following tests.

The procurement method must, and now, will rest on a fixed priced contract - and the project may proceed provided that the price post tender certainly does not take us beyond the £92 million cost envelope.

The Assembly must have David Rowe Beddoe's assurance that the Board and executive will be well equipped to tackle the next phase of the project and the Building Subcommittee is given the capacity to tackle the task fully.

The Subject Committee must take stock - and be reassured - of the business plan and the extent to which there is a reasonable expectation of accommodating the operational phase within £2 million annually, should the WMC fail to deliver on its ambition to operate without public subsidy; plus support of a broadly similar order for associated artistic activity elsewhere in Wales is realistic.

Given the necessary continuation funding for the project through the summer, the project will be in a condition to go ahead so long as these conditions are met.

There is every reason to think that they will be. However, if any of the tests are not met then the project must inevitably fall.

They will have to be met simultaneously, well before the autumn. There is no case for incurring substantial extra preparatory support costs for the WMC once the result of the fixed price invitation is known.

The Government of the National Assembly will not support this project unless the financial tests I have identified are passed. The tests must be passed for us to fulfil our obligations as a Government,

However there are also political tests. This is a project which seeks to benefit all interests - cultural, economic, social - and all parts of Wales. It will only go ahead if there is political support in all parties and from all parts of Wales. Ultimately I believe that it is right that Assembly Members should vote on a motion to support this project. When that happens the Government of the National Assembly will not be looking just for a bare majority; it will be looking for support in every party and from all parts of Wales.

The approach we are commending to you today rests on a candid assessment of the realities facing us. It is based too on a determination to be clear sighted about the overall project costs and about the remaining tests that the project should meet so that we can be completely confident about it going ahead.

Those same tests rest on a farsighted appreciation of the project's potential for Wales - a project that could be part of Wales' definition of itself; confident of our cultural identity, investing not just in a building but in our people's ability to express themselves on a world stage.

The benefits of this project are very substantial. But this Assembly has a responsible Government determined to control the costs. This statement has established the financial and political tests that this project must meet if it is to go ahead.

The project deserves the chance to pass these tests.


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Thursday, April 05, 2001back

 

 

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