Hansard

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

Queen's Park's principal creditors, has been essential. I wish to place on record the Scottish Executive's thanks for their contributions to the rescue deal and to achieving an outcome that the great majority of people in Scotland will welcome. I particularly wish to thank Sir William McAlpine for his understanding and forbearance as the negotiations over the rescue package have dragged on.

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

as a result of increased specifications; additional works that were not part of the original project and were not agreed with co-funders; and acceleration costs to stage the Scottish cup final in May 1999.

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 cofunders' 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 conscious that the Scottish Football Association would be a major user of the stadium, since it would not only stage matches there but planned to rent office accommodation, space for the football museum and associated activities and make use of the lecture theatre and conference facilities and the sports injury clinic. The SFA's rental payment would have represented most of the guaranteed income for the stadium operation.

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 cofunders 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.