“The Gathering 2009”
Item 2 on our agenda is on the section 23 report “The Gathering 2009”. I welcome Lord Sempill and Jenny Gilmour, who are directors of the company The Gathering 2009 Ltd. Members will be aware of the exchange of correspondence with the Presiding Officer and of the advice that we sought from him. Before we begin the oral evidence session, I make it clear that, as liquidation procedures are on-going in the courts, members should refrain from saying anything that has the potential to prejudice that court process, as advised by the Presiding Officer in accordance with rule 7.5 of the standing orders, on sub judice.
Thank you for inviting us. The gathering was undoubtedly the centrepiece of homecoming 2009—for many, the gathering was homecoming 2009. The Gathering 2009, which was incorporated as a limited company prior to the year of homecoming and independently of it, had a clear mission: to create the world’s biggest ever clan gathering and highland games in Scotland and to develop future gathering events and extend the gathering brand. While the previous Scottish Executive-led homecoming project continued to misfire throughout 2006 and 2007, costing the taxpayer a reported—in the press—£1.5 million, The Gathering 2009 was forging ahead with its own global promotion.
That was Steve Cardownie.
Yes.
Hold on please, George.
I just wanted to know who it was.
The resulting very public spat and media storm saw another two months of uncertainty and another IPA valuation, which ultimately resulted in a call on 27 January 2010 to say that the deal could not go ahead. The next day, we had to call in the liquidators and, as we have said, the company is still in the liquidation process.
Thank you for your statement. Did George Foulkes want to clarify something?
No, I think that Jenny Gilmour confirmed that Steve Cardownie, the deputy leader of the council, had agreed but had not informed the council leader, Jenny Dawe. Is that right?
I assume that that is the case. The next day, Jenny Dawe went on the record as saying that the agreement was not in place. You would have to ask the City of Edinburgh Council and its officers about that discussion.
I have some general introductory questions. Has either of you ever managed an event of this scale before?
Not of this magnitude. The event was unprecedented in Scotland.
I was involved in an event of this kind in South Africa, but in a totally different context. I worked on behalf of a large brewer, and we spent a substantial amount of time putting together what is probably the biggest musical roadshow that has ever been undertaken in Africa. It ran for five years, using the funding of the South African Breweries Ltd.
But you have never had personal responsibility for funding and organising something on the scale of the gathering.
Not as part of my personal endeavours.
Jenny, you said that this was a purely entrepreneurial project and that you had received seed funding from the private sector. How much was that funding?
We received £30,000.
Although you say that the event was a purely entrepreneurial project, that money is insignificant when matched against the funding that came in from the public sector.
I agree, in the first instance. However, after that, we accrued more than £200,000 of private sector sponsorship, and the initial seed funder also became one of our main sponsors.
So, you received £200,000 of private sector sponsorship.
I think that the total was close to £230,000.
Again, that is less than the public sector put in.
Yes, it is.
So, although it was a purely entrepreneurial event with seed funding from the private sector, it was largely funded by the public sector.
In ratio terms, yes.
You say that you had a contractual agreement with the Scottish Government. At what point was that contract signed?
I am not sure of the exact date—I think that it is in the report—but I believe that it was in May.
What were the conditions or terms of that contract? What was the Scottish Government obliged to give you, and what were you obliged to give back to the Scottish Government?
The terms of the contract were that we would be given £180,000 as a short-term loan to offset our cash-flow scenario, and that we would return that money after the event.
So the contract was signed after the problems started to develop. It was not signed at the inception of the event.
No, it was meant to alleviate the short-term cash-flow situation that arose because of WorldPay.
We will return to the WorldPay issue later.
Or profit-making.
Or profit-making in the most optimistic of scenarios.
Yes.
However, as business people, presumably you do not just base your assumptions on the most optimistic of scenarios. You realised that there was a significant chance of the event making a loss.
It would have been remiss of us if we had not looked at three scenarios. Obviously, the event was two and a half years in the future and many factors can affect an outdoor event of such a scale. However, we projected and focused on making the event very successful.
When you went into the contractual agreement with the Scottish Government, was it aware that only in the most optimistic scenario would the event make money and that other scenarios indicated that it could quite easily make a loss?
We provided detailed information to the steering group and the Scottish Government.
Did that detailed information include the most up-to-date figures?
Yes.
Did those up-to-date figures indicate that you were on course to make a profit or a loss at that point?
That is a difficult statement to make, because most of the income revenue streams were predicated on the day, so everything was a future projection.
It was the most optimistic analysis. I presume that you have seen the report that the Scottish Parliament’s Economy, Energy and Tourism Committee commissioned. That report is critical of the projections and the analysis in relation to the homecoming, and it also looked at the impact of the gathering. What is your opinion of the criticism of that economic analysis?
It was only criticism. I do not recall that Dr Riddington offered up hard evidence in figures.
So you think that the report lacked evidence.
I would have thought that that would have been the brief and that Dr Riddington would have applied his methodology to producing figures that he could compare. I do not think that he did that, although I might be wrong.
That is fine.
We used a variety of information. We put a lot of research into the project as early as late 2006. As the committee is aware, I travelled to the United States extensively, primarily to the large highland games that are held there, so I had a fairly good idea about gate projections. I researched costs and the potential charges that we were thinking of making for the tickets at the time across three fairly well-recognised highland games in the United States. I also knew the local games circuit here reasonably well.
I presume that your projection of 30,000 was the minimum number of people that you required to break even.
Yes. When Jenny Gilmour and I started working on the costs that we felt would be incurred in putting on the event, we had to take stabs in the dark to a large extent. It was the first time that an event of such scale had taken place on Holyrood park or that anybody had ever thought about marching the best part of 8,000 clanspeople up the Royal Mile. Also, a lot of important parties—namely, Historic Scotland and the City of Edinburgh Council—had to come back to us with costs and I have to tell you that some of those costs did not arrive until a month to two months prior to the event.
The infrastructure costs for an event of such scale were massive. We had a highly experienced production team working on the management of the event. The team worked on costings from a year and a half before the event took place, so we constantly examined those costings and analysed the budget and spend.
How many of the 30,000 people that you projected as necessary for the event to break even were anticipated to come from overseas and how many did you anticipate from Scotland?
I always had confidence, which proved correct, that we would get more than 5,000 people from overseas and that the rest would come from within the United Kingdom.
What was the breakdown for those who came from within the United Kingdom? How many did you anticipate coming from Scotland?
I have that figure recorded somewhere. If you want total accuracy, I would prefer to give it to you post the committee meeting. The reality is that the majority of clanspeople are likely to be resident in Scotland, so it had quite a large representation. However, the United Kingdom—specifically, England—is still far and away the biggest tourist contributor to Scotland.
It would be helpful to get that information. Was the projection purely based on what you describe as clanspeople?
No, no. I am talking about the day sales. As you are aware, attendance broke down into two different types of visitors: those who came from overseas, who bought into a product called the passport; and those who just rocked up during the event itself. Obviously, the majority of the latter were local.
Even forgetting what subsequently happened, I am not sure that the gathering made a huge impact on the consciousness of the public in Scotland. Notwithstanding the fact that people may have been put off coming from abroad by economic recession and fears about swine flu, it did not seem to make any impact at all in Scotland.
That is your opinion, but I think that it did.
We can exchange opinions, but I would rather deal in fact.
I do not think that it is a fact.
Do the facts of the numbers sustain your contention?
I said earlier that we would have more than 5,000 from overseas and I suspect that it was closer to 7,000 over the weekend. If we take away that 7,000 from the 47,000 footfall that we recorded, that means 40,000 people from here came to the event over the weekend, which is more than most football matches in Scotland.
Very significant numbers attended the first event.
Was the steering group aware of your financial projections?
Yes.
At all times?
Yes.
And was it aware of any shifts in analysis?
Yes.
So the steering group was fully informed at every step of the way. Did it make any comment on the realism of your projections?
We had very detailed discussions with the group. The members were aware of working in events in Edinburgh and the Lothians, and in Scotland, so they advised us, and we took on board many of the things that they said. The discussions were very constructive: we were trying to make the event the best that we possibly could, so when they suggested, for example, that we did not charge for the literary auditorium because it might be seen as a double sale, we took that on board. Sadly, we should probably have carried on with that, because every single session was over capacity and a huge number of people were disappointed that they could not attend.
At what point did you start to indicate that the event would run at a loss?
We did not know that it would run at a loss until after the event.
So when you asked the Scottish Government for a loan, you were still anticipating at that point that there would be a profit.
Everything was in place for the event to go ahead, and therefore, if we hit all our income streams, it would have either had a slight shortfall or made a profit.
So the suggestion that we have heard—that from an early date in your planning and development the financial projections were showing that the event was likely to run at a loss—is not true.
Can I—
Unfortunately, we could not obviously state that it was going to run at a loss. Most of the income streams are predicated on the day; we would not have known what they were until the day.
Sorry, Lord Sempill—did you want to come in?
I just wanted to reiterate what Jenny Gilmour just said.
In your planning and development process, and in preparing the financial projections, was it the case at an early date that those projections were showing that the event would run at a loss?
It could run at a loss.
It could run at a loss, but I would like to pick up on a point that we made at the beginning of the meeting. The Gathering 2009 Ltd was set up to run more than one event. We had, between us as directors, taken on the reality that we may have to carry through a loss on our business. We already had a good overdraft in position with our bank, and we felt that, provided that we remained in that overdraft position, we would be safe going forward.
So you were providing information to the steering group on your financial projections, and it was aware at every stage of what you were anticipating. You were giving the group information that was showing at every stage that there was a possibility of a loss, but you were also giving it information that was showing that there was a possibility of profit.
Correct.
So you were giving it two scenarios all the way through, with detailed figures in relation to each scenario.
Correct.
From April 2009, there were three different scenarios.
Okay. Did you give any opinion to the group at any stage on what was the most likely scenario?
That is a difficult analysis to make, which is why we created three projections.
Right. But no one asked for your opinion on which was the most likely.
At all the meetings that we had, the issue of footfall was probably the biggest discussion point. Everybody who has been in the event business in Scotland would support us in saying that the weather plays a huge role. In our case, we were reasonably fortunate on day 1. I do not expect any of you to remember this but, at 12 o’clock on the night prior to the gathering, there was a storm in Edinburgh with unbelievable rainfall. I dreaded having to open the gates the following morning, primarily because I thought that the storm would rage on through the night. However, we were fortunate that sunshine broke out the following morning and, although it was wet underfoot, the crowds came. The Sunday proved the point. It was dull and overcast with slight drizzle and, frankly, the park was empty until about 11.30, when the sun started to break quietly through the clouds. We could not guarantee to the committees in the run-up to the event that it would be X or Y, as that was always impossible to call.
So the steering group was fully informed of your financial projections at every stage and it was aware of potential losses and profits.
Correct.
I want to follow up on some of the convener’s questions, just to get clarity. You had three financial scenarios for the outturn—pessimistic, likely and optimistic. On the most likely scenario you were scheduled to run at a loss, but you said that you believed that that was acceptable, as the company would perhaps run on into the future. On the most optimistic scenario you would have made a surplus of £118,000, and on the most pessimistic scenario there would have been a loss of £223,000. If the optimistic scenario had occurred and the company had made a profit, would any of that have gone back to the public sector funders?
With the contract that we had in place for the loan, yes.
So there was an element of repayment.
Yes.
Yes.
Even with the most pessimistic scenario that you had forecast, would the company still have been solvent?
Yes.
Yes.
So all the creditors would have been paid, even on the most pessimistic outcome.
Yes.
Yes.
The actual loss was substantially more than that predicted in the most pessimistic scenario—it was more than double that amount.
Yes.
Yes.
How could that not have been foreseen?
When we came to the event, many factors influenced spend on the day and the number of people who came through the gate. Very soon after the event, we had to cease spending and accruing any more credit, so we could not market the post-event merchandise, which resulted in a significant shortfall.
It would probably help if I mentioned a couple of lines in our budget, just to clarify why the loss was substantially greater than we ever thought it could be. Spend per individual on the day was far lower than we had anticipated. As I said, we based the figure that we used in our budget on years of research by VisitScotland. It was based on expenditure of £8 per head, but that figure worked out to be closer to £6 per head.
I hear all that you say, but my difficulty is that you have given us three outcomes, one of which was the most pessimistic, but it was not pessimistic at all. In fact, the reality turned out to be far worse than your most pessimistic scenario. That suggests a rather serious failure in your financial planning.
I am happy to accept that criticism, as that is the reality. We put the budgets together, as does every company, with the best management foresight that we could use and with the maximum input. I repeat that a project of this scale involving what we were trying to do had not been done before. We took our best shot at the time, with a lot of input. Unfortunately, as you point out, we called it wrong.
I wish to clarify a couple of figures. You talked about the brochures, and said that you had anticipated that there would be 30,000 people at the event.
I return to the earlier point. I said that we would have at least 30,000, and that is what we based most of our revenue streams on.
So you based your revenue streams on the most pessimistic scenario.
No—the point is that each scenario catered for the footfall that we put into it, but we based all our raw cost assumptions on having 30,000 people, to use our worst-case scenario. If there were 30,000 people, how many brochures would we realistically expect to sell? We felt that 15,000 was a reasonable shot.
Based on projections of 30,000 people, your budget outturn showed a deficit of £223,000.
Yes.
If, based on having 30,000 people, you anticipated figures—
That was required to order the programmes. We had to assess how many we thought we could sell.
You said earlier, Lord Sempill, that 40,000 people attended over the weekend, yet ticket sales were 32,400.
Forty-seven thousand people attended over the weekend.
Forty-seven thousand? So 15,000 did not pay.
No—the passports are delineated out of the budget and are separate from footfall and walk-up. The passports would be double-counted, because they came on the second day.
So it was not 47,000 people.
It was: 47,000 people came through the gate—that was the gate figure.
But some of them possibly attended twice.
Yes, and then we had the performers—
The number of people who attended was presumably 32,400 or fewer—not all of them necessarily attended on both days.
No—32,000 is the actual number of people who paid on the day. The passport holders come on top of that, and they are double-counted. There were also the performers and complementary tickets. There is a breakdown, which takes the 47,000 figure down to the 32,400 figure. That gets us to the number of unique payers who came through the gate on the day.
I wish to confirm a couple of points. Do you have the Auditor General’s report in front of you?
Yes.
Paragraph 6 says:
If we had had to return the loan, we would probably have reached about parity.
I am talking about before the loan—the loan comes later. When you set up the company and agreed the arrangements with the steering committee originally, you were going to benefit from any profits made.
Yes.
Correct.
Yet you were not legally required to pay back any of the money that was given to you by the public sector.
No—that was funding.
That was not clear in the answer to Murdo Fraser’s question.
I am sorry.
That paragraph in the report continues:
Yes.
That is obviously what we are talking about now. Red Sky at Night Ltd, of which you are a director, Jenny, is an events company. Is it still in existence?
Yes.
Is it profitable?
Possibly not this year.
But it has assets.
Yes.
What sort of assets?
Very little in cash, because Red Sky at Night and I combined are the biggest private creditor of The Gathering 2009 Ltd.
I see. I want to clarify another point. In reply to a question, Lord Sempill said that this was the first time that anyone had done this. Maybe that is because most people thought that it was a daft idea that would not make money because people would not turn up to it.
It has to be a possibility that some people thought that, but let us not forget the purpose of the homecoming, which I believe was put in place by the previous Scottish Executive. It was to run a year of events in Scotland, which—
But homecoming and the gathering are two separate things. We could have had homecoming without the gathering. Homecoming was the Executive’s idea, but the gathering was your idea—you came up with it.
If I may, sir, I just point out that the original remit of the homecoming was to attract people of Scottish descent or people with an affinity for Scotland to come home during 2009. I propose that probably the greatest connection is that of people of Scottish descent who are involved in clan activities.
We are not going to get into that argument. I want to move on to cash flow and financial difficulties, but Anne McLaughlin has a question first.
Jenny, you talked in your opening statement about the reasons for the financial failure. We should emphasise the word “financial”, because I agree that the cultural impact was significant, and we should never underestimate the international impact. I think that you said that people from 32 countries came to the clan gathering.
To answer your last question, when we reached the point at which we were aware of the significant shortfall, we could not, as directors, make that any worse, so we could not accrue any more credit. In order to realise the post-event sales, we would have had to market quite extensively. That was in our planning, but we could not do it, so we lost the revenue from CDs and DVDs and the significant future brand events that we hoped to plan. All of that had to be put on hold.
Because legally you were not allowed—
As directors, we were aware that it was essential that we did not accrue any further credit, because of the holding pattern that we were in, in terms of our negotiations.
I understand why you were unable to accrue any more credit. If you had been able to do that and you had managed to realise money from post-event sales, what impact would that have had on the overall figures?
It is a question of adding on sales of things such as CDs and DVDs. We had projections that took us through to Christmas, and there would therefore have been a major return on that. We had income of £60,000 to £80,000 in our budget for CD and DVD sales, and we had significant orders for the DVD.
Okay. Thank you.
I am relatively new to the committee discussion on the subject. Forgive me, but I am trying to get further clarity. My first question is for Lord Sempill. In terms of your financial projections at the outset, how many passports did you put down under expected sales?
We wanted to sell 8,100 passports. Right up until late 2008, we looked very well on track for that. We eventually sold 7,500.
Just over 7,200.
Seven thousand five hundred. The figure of 8,100 was a specific one; it related to the number of people who can be seated on the castle esplanade for the tattoo, which has a maximum capacity of about 8,500. We felt that we could sell 8,100 passports across the globe—that was the projection.
And were different figures given? Earlier, you mentioned spend per visitor at the gathering, whether for overseas visitors or for people from Scotland and the UK. Was there a differential in spend per head between American visitors and Scottish residents who popped along on the Saturday?
I am not certain that I can answer that question. Obviously, the spend on buying the passport was a given, then there was the spend at the event itself. We have taken the total footfall at the event, but we could break out that figure. We are aware that the vast majority of those who came long distances spent the best part of two weeks in Scotland, of which only two to three days were spent in Edinburgh. I am sure that their spend outwith Edinburgh on hotel accommodation and travel was used in the EKOS report on the gathering. That report confirmed that £10.4 million came into the Scottish economy on the back of the gathering.
Your opening statement addressed areas where you eventually had financial problems. In most of your target areas, such as overseas sales, brochure sales and post-event sales, you did not reach the target.
Correct
So cumulatively, you arrived at—
In terms of income, each budget line shows where the significant loss came. Obviously, we kept our expenditure within 1 per cent of our projections for the day. We could expend a lot of time and energy on that area to get the correct figures.
In your opening statement, you referred to the homecoming theme, which was clearly an issue for the former and present Scottish Government, so we all have a commitment to making homecoming successful. You had concerns about the lack of clarity for homecoming Scotland, and saw the gathering as a key element that needed to be brought to the fore to try to fulfil the potential of homecoming. Could you amplify that argument, because I have not heard it before?
In 2006 and 2007, no events were in place. There was a break before VisitScotland and EventScotland took on board the planning of the project, so there was a bit of a hiatus. At that time, we were out there developing and selling not only the gathering but the concept of homecoming. We were getting it out into the diaspora countries. People were already starting to engage with the concept. We did a lot to promote not only the gathering but the ethos of homecoming. We started to create excitement. The many visitors from, for example, New Zealand and Australia needed a lead time. The gathering was a once-in-a-lifetime event for them; they invested huge amounts of money into coming across for the event and homecoming.
Page 13 of Audit Scotland’s report “The Gathering 2009” refers to the financial projections. The report states that the final financial projections were presented to the steering group on 15 July 2009. Am I correct in saying that those budget projections did not include the £180,000 loan from the Scottish Government?
Yes.
So you were looking purely at the budget, rather than cash flow. Did you give cash-flow projections to the steering group at any stage?
I am not sure that we definitely did so—I think that we did. We also gave them to Scottish Government officials, when we were looking at the loan.
When did you give cash-flow projections to the steering group?
I would have to look back at the agendas to identify the months in which we did that, as the number of meetings escalated in the run-up to the event. However, I can give you the information.
Did you give cash-flow projections on 15 July, when you presented the final financial projections?
I am not sure—I would have to look back at the agenda for the meeting.
In response to an earlier question from me, you said that cash-flow projections were given to the steering group at every stage. Now you seem to be uncertain.
Not cash-flow projections but budget projections.
So cash flow was not part of your budget projections.
We were not asked to provide that information.
So the steering group did not ask for it.
No.
These are important distinctions. It would be valuable to the committee to have as soon as possible the detailed information that I have requested.
We need to move on. When did it first dawn on you, as directors, that you could not manage your cash flow without financial assistance?
In April 2009.
You said that the problem was caused by WorldPay’s failure to release funds, but was that not part of the contract with WorldPay?
Yes.
So you knew that that would happen.
Yes.
We clearly understood the reality of our contract with WorldPay and accommodated that in our budgets. However, as Jenny Gilmour said in her opening statement, we started to suffer shortfalls in areas such as sponsorship and various other income streams that we were trying to get together. That put more pressure on us financially.
We will come to that issue in a moment. Earlier you said that your financial difficulties were caused by WorldPay’s failure to give you the money; you made the same point to Audit Scotland. Now you say that the problem was not that, because you understood the terms of your contract with WorldPay, but sponsors withdrawing their support. Which sponsors withdrew their support?
No. We forecast that X amount of sponsorship would come in at certain periods in the run-up to the event, over two to three years, but we did not get the level of sponsorship that we initially wanted. That meant that we had to recalibrate certain areas. We recalibrated our budget as we got closer to the event and started to understand what the costs were.
So the problem was caused not by sponsors withdrawing but by failure to obtain sponsors.
That is correct.
You realised that you would not get the money from WorldPay and wanted to get help with cash flow. Whom did you approach? How was the approach to get the loan made?
First, we informed the steering group of the WorldPay situation.
When did you inform it of the cash-flow problems?
That was in April 2009 as well.
Oh. Okay. That seems to be different from what you said earlier. So you did not inform the steering group. You said to the convener, Hugh Henry, that you informed it about the budget projections, but not about the cash flow. You are now saying that you did—
I am sorry. Obviously, we informed it about the WorldPay cash-flow shortfall and how the WorldPay situation was affecting our cash flow.
But you knew about the WorldPay contract. That did not change.
No.
You had cash-flow problems. When did you inform the steering group about them?
In April.
How did the proposal for the £180,000 loan arise? Who came up with that idea?
Obviously, the steering group could not help us in any way, so we spoke to EventScotland and then the Scottish Government.
Both of those were represented on the steering group.
EventScotland was the lead agency on the steering group.
So the Scottish Government was not.
No.
Whom did you approach in the Scottish Government?
We went through EventScotland.
Who made the approach?
Paul Bush.
Sorry?
I assume that the chief executive of EventScotland, Paul Bush, did.
When and how were you informed that £180,000 would be made available as a loan to you under the terms that it was made?
We were called to a meeting at which we discussed the issue.
Who was at that meeting?
We were called to a meeting with Mike Russell because we wanted to talk to him about broadcasting issues. We were trying to get the event broadcast.
So you had a meeting with Mike Russell about broadcasting. Did he say—
We then informed him that we were having a problem.
Did he say that he could give you £180,000? Where did the idea come from to give £180,000 under the terms in which it was granted? Your company is the only private company to have received a loan under those terms. Who came up with that idea? It was very clever, and whoever came up with it deserves credit for it.
We presented a proposal regarding potential options to the Government. The options included event funding, assistance with approaching WorldPay to discuss matters at that level and a loan.
Who came up with the idea of a loan? The idea was very clever. Come on—give them credit.
The reality is—
Did you come up with the idea?
The reality is that both Jenny Gilmour and I as directors of the company realised the critical position that we were in.
Yes.
Obviously, we looked for various scenarios in order to cover our cash-flow shortage.
We know that.
One scenario was a loan.
The question is very simple. Even a lord could answer it.
A lord can ask it.
You could have had £180,000, robbed a bank, asked Brian Souter to give you money—he has plenty money—or got a loan from the Royal Bank of Scotland.
We could not have done that.
No, you tried that. Exactly. So you get my point. Who came up with the idea that you should get a loan of £180,000 from the Scottish Government under those specific provisions?
We saw the loan as a possible option. We looked at every scenario. We looked at all of those things that you are talking about to try to receive money. Our proposal was about how things could work. We did not know; we made a suggestion to the Government.
So you made a suggestion to the Government, which said, “Okay. The idea that we should give you a loan is a good one.” Who came up with the idea that it should be made under the particular legislative provision?
Unfortunately, we cannot answer that. All that we know is that we eventually received a call from the Government, which said, “Okay. We’ve looked at the various options that you have put before us, and the best option that we think we can come up with is to provide you with a loan.” You can imagine that both Jenny Gilmour and I were thrilled.
Who said that to you?
It was conveyed to us by the First Minister’s—
Private secretary.
Yes.
I am answering your questions for you, now.
Well, thank you very much.
So the private secretary to the First Minister phoned and said that you would get a loan of £180,00—
No. He said, “We feel the best option is to provide a loan to The Gathering”, and we said, “That would be absolutely fantastic.”
I can imagine that you would.
At that stage, the amount of the loan was not clarified. We had a subsequent meeting to discuss the level of the loan and, from then on, it went through what I consider—
Who was that subsequent meeting with?
The private secretary, a representative of the tourism department and two other ladies—I cannot recall their names, but we have them on file and I can provide you with them.
When did you know that you would not be able to repay the loan?
When we eventually counted up the total proceeds of the weekend. It took us about four or five days to count in all the revenue streams, which was when we realised that we had a substantial shortfall. It was around early August that we recognised the magnitude of our loss.
And, at that point, you met Michael Russell to say that you could not repay the loan.
No. The first thing that we did was to call EventScotland to tell it of our predicament, and it opened up various channels of discussion with the Government.
We will come on to that later. First, I would like to clarify something. When you met Michael Russell to discuss broadcasting options, you indicated to him that there were certain difficulties, and a number of options were presented, including the possibility of a loan. Is that correct?
Not at that time.
When we met Michael Russell, we went specifically to talk about broadcasting. In the process of the discussion, he asked how things were going and we said, “We think things are well on track. We have one major concern, and that is our cash flow.” We then went into the cash-flow issue in a bit more detail with him, and he said that he would have to review the situation and get back to us.
You did not ask for a loan at that point or even mention the possibility.
That is correct.
He went away and thought about the situation and the next thing that happened was that you got a call from the First Minister’s private secretary.
No. The next thing that happened was that we were asked to put together a paper to clarify exactly what the status was and what our concerns were, so they could review it in some depth, and we did that.
At that time, we were also in discussions with our bank, to try to resolve the situation in that way.
After you submitted that paper, the next contact was from the First Minister’s private secretary, who said that a loan was being considered. Is that correct?
I am not certain that I could confirm that that is exactly the right sequence of events.
We can check the Official Report to make sure, but I believe that, earlier, you said that, following the meeting with Michael Russell, you got a phone call from the First Minister’s private secretary.
All that I am pointing out is that it was a key moment for us when we got the call from the First Minister’s private secretary informing us that the Government had considered the matter and felt that a loan was the best option and inviting us to come to discuss the matter further.
You cannot answer this but, from my experience as a minister, I know that it is unusual for someone to meet a cabinet secretary, submit information to officials and then get a phone call from the First Minister’s private secretary to indicate that options are being considered. That is a matter that we can pursue separately, but we need it to be clarified. You offered to give us more information about who was at those meetings. That would be helpful.
We updated the cash-flow projections every 24 hours. They were available and we used them where requested and required. The further back we go to the events that took place prior to the cash-flow problem, the less relevant the cash flow is. It became much more relevant as we went into the final part of 2008 and the six-month run-in to the event itself.
As the cash-flow problem started to develop, it was not reported to the steering group as an influence on your financial projections.
Earlier, I made a point about costs. When they started to come in, some of them were considerably higher than we had anticipated, so they in turn had quite an impact on our cash flow. A highly competent team of individuals was negotiating with the various suppliers, but the spend on the build that was done in Holyrood park, behind us, was of the magnitude of £0.75 million. When we first started looking at that, the cost was not down as £0.75 million. By the time the costs started to come in, we had requested the level of support that we needed, but you can imagine the pressure on expenditure in the budget, and that had to be recalibrated.
As the costs started to increase in a way that you had not anticipated, did that influence the financial projections that you were still giving to the steering group?
Yes.
Yes, absolutely.
So the financial projections started to be downgraded at that point.
They were being recalibrated the whole time.
You also said that there was a shortfall in sponsorship.
Correct.
Did that impact by reducing the financial projections that you were giving to the steering group?
As we started to see doors shutting, we had to recalibrate the budget. Our initial aspiration was to get more than £350,000 in sponsorship, then suddenly, come 2008, a massive recession appeared on our doorstep, as we all know. It is significant to point out that when we went to that event, we did not have one single cent from the finance community of Scotland. We had had discussions with various companies and it all seemed to be quite hopeful in the later part of 2007. When it was obvious that the sponsorship was not going to manifest itself, we had to adjust those income lines, which put considerable pressure on the contingency, which was eventually entirely used up in trying to cover some of the income shortfalls.
So while you did not give cash-flow projections to the steering group, your downgrading of the financial projections made it aware of the problems of rising costs and the failure to attract additional sponsors, both of which would have had a significant impact. The steering group knew that early on. What did it say at that point about the event’s ability to make a profit?
When we made adjustments to various income lines, there would be a discussion with the steering group about that. The reality was that the profit was being squeezed all the time and became less likely. We then decided to raise marketing spend, with the help of EventScotland, to ensure that we maximised the gate. More and more pressure was put on that weekend to deliver the footfall and the spend within the event. We were always optimistic that we would have a reasonably good footfall and relied on the hope that the spend that we had allocated to certain lines would manifest itself. Sadly, it did not.
Before we move on to talk about liaison with Government bodies, Bill Kidd has a point.
I would like a wee bit of clarification on the cash-flow issue. Jenny Gilmour, I think, mentioned briefly that at one point you were talking to the bank. The bank was the Royal Bank of Scotland, which owns WorldPay, which was retaining—admittedly, as part of the initial contract—the payments from the passports and suchlike.
It tried very hard, and there were weeks of negotiation, but WorldPay would not agree.
And your own bank, which is in the same group, could not influence that at all?
No, unfortunately not.
That says a great deal about the Royal Bank of Scotland.
You both seem to have been fairly happy with the support that you got from the Scottish Government. The Auditor General has been much quoted as saying that it was understandable that the Government would want to loan the money so that the event could go ahead. I dread to think what would have happened had it not done so. Perhaps you can tell us what would have happened if you had not received the loan.
The worst-case scenario would have happened: we would have had to realise that we did not have the money to put on the event. If that had happened, our list of creditors would have been substantially greater, as you can imagine. Some would not have been on the list, but there would have been the best part of 5,500 passport holders to start with. From our perspective, it would have been exceptionally damaging.
People might not have travelled.
That was the worst-case scenario.
Yes.
So even if the loan had not come through, you had other options for how to keep the event going.
Yes.
So the loan was a welcome bonus, but it was not absolutely critical.
It was to assist the shortfall during that period so that we could pay the invoices. In event management, a lot of invoices are deposit invoices, and the magnitude of the site infrastructure—the marquees alone involved a significant six-figure sum—meant that 50 per cent deposit invoices involved significant up-front payments.
You became aware that there would be—and you were projecting—a cash shortfall in April 2009. Is that correct?
What level of shortfall were you projecting at that time?
We would need to—
We would have had budgets at the time.
At the time that you met the minister, on 28 April 2009, what shortfall were you projecting?
Are we looking at the three case scenarios?
No—I am talking about cash.
The actual cash shortfall.
I am talking about the cash shortfall.
The eventual figure that we were looking at for the shortfall was £180,000, given the advance deposit invoices that we knew were coming in. We already knew the terms and conditions of all our suppliers, so we knew that that would be the level for which we would need to get some cover for that short period of time.
I have a briefing note here that refers to the company
That is probably about right, because we were using our £100,000 overdraft facility too.
So the cash shortfall that you were projecting—which you could presumably be reasonably certain about, because it was prior to the event, so the uncertainties of the event would not affect it—was around £260,000 to £280,000.
Which we were confident would be covered by WorldPay.
I understand that better now. You believed that you could cover it.
Yes.
We had it covered by our—
You did cover it, eventually, with the £180,000 from the Scottish Government, plus your £100,000 bank overdraft. Is that correct?
That is correct.
That is helpful.
We do not have it here today.
The convener might need to rule on this, but the company, of which Jenny Gilmour and I are no longer directors, is in liquidation, and all the correspondence that we had, including the critical correspondence, has been handed over to Campbell Dallas. We have copies of some papers—
I would not wish to ask either Lord Sempill or Jenny Gilmour to get involved in such issues. However, we can ask the Scottish Government for a copy, as it was the recipient.
Indeed. That is what I was going to suggest. That is the most obvious route to obtaining that paper.
We would need to look at our diaries.
It does not form part of the detailed timeline of information that has been provided to us in the report “The Gathering 2009”. Will you be able to give us that date?
I am sure that we can.
We could get very close to it, although I do not know if we will be able to give you the actual day. We can get to within a week or so.
Did you or anyone representing you contact the First Minister or his office between the date of the meeting with Mike Russell and 1 June, when the offer of the loan was finalised?
Did we contact him?
Did you or anyone representing you contact the First Minister or his office during that period?
No.
I do not think so.
So the first contact was from the First Minister’s private secretary to you. To which one of you?
It probably came through to me. I am sorry to sound a bit vague about it, but quite a bit of time has passed and, as you can imagine, there have been 1,000 phone calls.
It was a very memorable call. You said how important it was.
It was. It was a memorable—
It was critical to the gathering, was it not?
We were being called to a meeting, and it sounded really positive. I would have to look in—
You think it was a call to yourself.
Yes.
You were being called to a meeting. What was the meeting that you were called to?
The meeting transpired to be about an agreement whereby the Government would offer us a loan with the proviso that we met the terms that it would put before us.
Who was at that meeting, and when did it take place?
Lord Foulkes asked that earlier, and I was unable to answer, primarily because I cannot remember the names of the people who were there.
Did the officials or ministers who were involved in the meeting seek payment of interest on the loan?
No. It was an interest-free loan.
Would you have paid interest if interest had been sought?
Yes.
You would have had to, would you not?
Yes.
Because the loan was critical to the survival of the event and of the company.
I call Murdo Fraser and then Anne McLaughlin.
I wish to add one thing first, on the issue involving the First Minister. Obviously we had met the First Minister before, but in slightly different circumstances, to brief him on the event itself. As I am sure you will all realise, we had royal patronage, which was an important aspect of the gathering. We had a very informal discussion—we are talking way before any of what we are discussing now.
Using your notes, can you indicate when that discussion took place? We can also ask the Scottish Government to provide the information.
Yes.
Who was your royal patron?
Prince Charles.
Prince Charles? He has a lot of money.
Not since what I read subsequently about the estate.
Anyway, I call Murdo Fraser, and then Anne McLaughlin.
On the Scottish Government loan, you met Michael Russell and discussed the cash-flow situation. After that, I presume, there were discussions with officials and then you had the telephone call to say that the loan would be forthcoming. In that intervening period, were you asked to provide financial information to the Scottish Government on the company’s financial position?
Yes.
In your view, was proper due diligence done by Scottish Government officials into the financial viability of the company at that time?
Obviously, we cannot comment on discussions that might have happened internally between the Scottish Government and, let us say, EventScotland, but EventScotland, as the lead body in the steering group, would have been well aware of all our projections. Over and above that, we supplied further information as requested.
That is interesting, because the Audit Scotland report says:
That might well be the case, but we were not party to any internal discussions that might have happened at Government or agency level.
But you were asked for financial information.
Yes.
I want to return to the question that I asked earlier. I seek a bit of clarity, as I think that the convener’s understanding of your response was slightly different from mine. I asked what the impact of not receiving the loan would have been. The convener said that there were other options so that, even if you had not had the loan, the event would have gone ahead. However, I understood that, without the loan, the event would probably have had to be cancelled and, as Lord Sempill said, the list of creditors would have been even bigger. Did you need the loan for the event to go ahead? Had the event been cancelled, what would have been the impact on Scotland’s international reputation? That is speculation, obviously.
The impact would have been massive.
I do not know whether the committee is aware that a letter was sent to one of the ministers recently from an organisation in the United States that is called the Council of Scottish Clans and Associations. If I may, convener, I will read it. It states:
Obviously, their definition of success does not extend to making money.
If I may continue, the letter acknowledges that point.
Oh, right.
It states:
I want to clarify the point that Anne McLaughlin asked about, as it is important. It relates to the question that she asked earlier and what I subsequently asked. She asked whether, if the loan had not been forthcoming, the event would have been cancelled. We will have the Official Report, but I think—correct me if I am wrong—that you subsequently said that, in the worst-case scenario, the event could have been cancelled. However, you also said that you had other scenarios and that, potentially, the event could still have gone ahead had the loan not been forthcoming. Is that correct?
The answer is that our ultimate fallback position was that the bank would have extended our overdraft considerably. However, as I think we are all aware, the banks were by that time taking a very different line. That was potentially a good option for us. We had quite a few meetings with our bank about extending our overdraft, but the bank became less and less willing to do that. By the time the Government got involved and talked about extending the loan—for all I know, there might have been discussions between the bank and the Government—we were happy to accept that solution.
Absolutely, but the question is whether you were considering other scenarios to keep the event going had that loan not been forthcoming.
Another scenario could have been an injection of a similar sum of money from a sponsor or one of the public events companies.
So you had other options that you were looking at.
There were other options.
We were looking at many options right up until the event. We were also pursuing sponsorship, and some did come in.
I appreciate that you were probably working round the clock by that time.
In our first couple of years of running the event, total Government funding was only £300,000, which represented only 14 per cent of our budget. Although we were incredibly grateful for the public funding that eventually came to us, it did start off, as I said, at the lower end of the scale. Sadly, it obviously rose substantially after that.
The other options clearly were not coming through and the event was getting closer. Had you not got the money from whatever source—and it seems that the Government loan was the only option that was open to you at that stage—would you have had to sit down and look at cancelling the event?
Yes. You can imagine the impact of that. Some £10.4 million would not have come into the Scottish economy.
Can you clarify that? Are you telling us that, if the loan had not been forthcoming, the event would have been cancelled?
No.
No.
You are not telling us that. There were other options that you were considering, but clearly the loan was very welcome.
It eased the shortfall in cash flow in the short term. In the month or two before the event, our deposit invoices were due and we had to make those payments in order to move forward to the event. The release of the revenue streams would then have come in. We had to get to the event.
Okay. We move on to questions on liaison with Government bodies, from Frank McAveety.
Who set up the steering group?
It was EventScotland.
EventScotland pulled together the City of Edinburgh Council, the local enterprise company—
Scottish Enterprise.
—and yourselves. How often did it meet?
Initially, it met every month, and then, as we got closer to the event, it met bi-monthly and then weekly.
Okay. What was on the agenda? Was it overall cost projections or cash flow?
It was the budget.
Right. I am a humble person. Can you tell me the distinction between the budget and cash flow?
Well, obviously, our budgets were our projections. Cash flow was not requested.
Okay, so we have a situation where the city council was sitting on the steering group with the enterprise company and EventScotland, both of which are Government creations. Did they raise issues at the meetings? You mentioned Paul Bush earlier. Did he suggest that you should approach the Government with one of the options that you mentioned?
No.
So there was never a discussion at the steering group about the cash-flow problem.
We discussed WorldPay, which was on the agenda of our meetings to allow us to tell the steering group about the situation and how it was affecting the immediate cash flow.
Can you remind me of the arrangement that you had with WorldPay? Surely that was in place from day one and never changed.
It did not. WorldPay works on the principle that it releases the moneys that it has received after the event.
That was always in your assumptions.
Yes.
So there was no change. In a sense, the philosophy that we are trying to develop around the issue is that the WorldPay arrangement, difficult as it was for you, was not the central issue around cash flow.
It was at that point because—
That issue would have been there at the very beginning as well. What is the difference?
Yes, but a significant level was being retained. The pre-sales and credit card payments held at WorldPay were greater than we thought they would be, as we were also looking to use PayPal, which is a form of payment that does not have the same terms and conditions.
PayPal operates on a slightly different system. As I mentioned earlier, that is why we went to that company. PayPal tends to take the money and hold it for the best part of 90 days before releasing it.
You can pull it down.
We used PayPal extensively for the highland games tickets. It played a role in the latter part of the event. The overseas money was predominantly held by WorldPay.
Did you act on any recommendations of the steering group?
Yes. I think—
And did you not act on others?
Yes. I think that that is true.
The steering group raised its concerns. It made recommendations, one of which Jenny Gilmour mentioned earlier, which was to strip out charges for the literary tent, which we did. It was also concerned about our pricing of the highland games. We looked very carefully at that. EventScotland expressed quite a lot of concern on the matter. In the end, we all agreed that the pricing structure was pretty accurate.
Did any agency on the steering group that was a Government creation make use of any formal reporting mechanisms to Government ministers and departments?
Not that we are aware of. We assume that, in the end, EventScotland, as part of VisitScotland, responds to the ministry of tourism.
There was no formal Scottish Government representation on the steering group other than through the agencies. Did you have any other formal arrangement with the Scottish Government for the project?
No.
Did you have any informal arrangements?
No.
Was it a formal proposal by the Scottish Government not to inform the steering group of the loan?
No.
No.
If it was not formal, how informal was it and how was it met?
Obviously, we treated it confidentially, as is the case when any limited company takes out a loan. That is how we handled it. As I said, EventScotland was informed of the loan. We let it take the lead on how it wanted to communicate that to the steering group.
The information that I have says that
It was informed of the loan.
It was?
Oh, yes. EventScotland definitely knew of the loan.
And were representatives of the capital city informed of the loan?
We do not believe that they were.
We do not think so.
And Scottish Enterprise?
We do not believe so.
Right. So, EventScotland was told.
Yes.
And it was a member of the steering group?
Yes.
There is a contradiction between what you say and the information that I have in front of me.
No.
Ever?
No.
No.
I seek clarification on the loan. Did you indicate to the Scottish Government at any point that the provision of the loan might jeopardise delivery of the event’s economic impact?
We were not focusing on that at the time.
You are the company that was handling the event. You are the company that was the recipient of the loan. You are the company that was dealing with the day-to-day arrangements and the media and yet you never said, “Look if it comes out that we’ve had a loan, it could impact adversely on the event's economic success.”
We were not focusing on that.
So that opinion did not come from you. If it was there, it was formed by the Scottish Government or EventScotland—it had nothing to do with you.
We were obviously aware that the thousands of people who were coming here would contribute massively to—
Yes, but you never said to them that there would be an adverse impact if it came out that a loan had been made.
That was never in discussion.
Frank McAveety asked about WorldPay. Did WorldPay give a reason for its unwillingness to release the funds early? Is there a justification or explanation for its inclusion of that contract term, which was there from the outset?
The terms are there to protect its purchasers.
Did it ever give the explanation that it would not change the conditions in case the event was cancelled?
No.
If the event had been cancelled, it would have had to repay the moneys that had been received, to protect its customers.
That is correct.
Yes. That is why it retained the money. That is what it does for events.
Is that a standard policy that it has for all events with which it deals, to protect its customers in the event of cancellation?
We talked to WorldPay in detail about the issue and tried to persuade it to release the funds. However, because the event was happening for the first time and had no precedent, WorldPay wanted to protect its customers.
Was it unwilling to release even a percentage of the funds?
Yes.
We are told that, at the time when the loan was being negotiated, WorldPay held income of around £160,000, which was expected to reach around £250,000 by the end of the event. It was quite a substantial debtor. Did you consider in some way releasing funds to your company by assigning the rights to receive the money from WorldPay?
The straight answer is no. I do not think that that was an option for us.
It was not an option.
Why was it not an option?
The response that we received from WorldPay when we tried to unlock funds was that the contract states clearly that the event must take place. We were hoping to use another lever on it, but I am not sure to what extent anyone else was in a position to do that. When our bank tried, it found that, unfortunately, WorldPay’s policy had to remain in place.
If you have a solid, reliable debtor such as WorldPay, you can often arrange to generate cash for your business by assigning the rights to that money.
The comfort zone for the Government was the fact that the money was tied up in WorldPay.
I move to my final and most important question. Did the Government ever seek to gain rights to payment from WorldPay, so that WorldPay would pay the £180,000 loan, instead of the money flowing to the company?
We do not know whether the Government had that discussion.
You would have had to be involved.
Absolutely.
Clearly, you were entitled to the money from WorldPay, which subsequently gave the money to you. That money is now lost.
We did not have that discussion with WorldPay.
There was never that discussion with the Government, so the Government did not seek to claim interest on the loan or look at ways of securing repayment on it involving WorldPay.
It may have done so independently of us, but it did not do so through us.
I want to ask about the potential purchase of The Gathering 2009. As Lord Sempill said earlier, it has been calculated that approximately £10.4 million accrued to the Scottish economy through the holding of the event. Therefore, there was no desire on anyone’s part to lose the brand that had been built up during that time. The Scottish Government could not make it a state-owned company, obviously, so the desire was that someone might take over the company by purchase.
We were aware that the Government had an intellectual property valuation done of the event, in order to create a market value for the IP. That would be the asset that could be sold on, rather than the company.
Were you aware of press releases that had been put out about that?
As I mentioned in my opening remarks, we were called to St Andrew’s house to have sight of the written press release that was issued on behalf of the Government, DEMA and the City of Edinburgh Council.
It must have been exciting for you, having been involved in the project for so long, to learn that it would not just be a one-year thing.
It would have been wonderful for the event to continue but, as you can imagine, for Jamie Sempill and myself, it was a hard time. We desperately wanted the debts to our creditors to be honoured.
Did you manage to keep the creditors up to date with developments? Were you allowed to pass the information along?
We felt very strongly that we were honour-bound, as directors, to inform our creditors of the situation. Once we were told that blocks had been put on to the agreement, we asked the council whether we could send a weekly e-mail to our creditors to inform them of how the discussions were going. The council agreed that we could, and it had sight of those e-mails.
Were you involved intimately with discussions around the purchase by a partner, with DEMA being the most likely purchaser?
We were not involved in the discussions.
We were very much in the dark about the discussions and negotiations.
You owned the company at the time, did you not?
At that stage, yes.
Were you in negotiations with the steering group? Were you part of the steering group’s discussions on what was taking place?
If you mean the gathering 2009 steering group, I do not think that it was involved in the discussions.
Had the group dissipated by that point?
Yes, in essence it had finished. The steering group’s meetings finished just before the event. We were not party to those discussions. We were just informed when we were asked to witness the press release.
The Gathering 2009 Ltd was a private company limited by guarantee and you and Lord Sempill were the directors. However, you were in the dark—if I may use Lord Sempill’s phrase—about the negotiations over who, if anybody, was going to take over the company.
It is not usual.
Is it very unusual?
I would say so.
Did no one from DEMA, the City of Edinburgh Council, EventScotland or the Scottish Government tell you at any time about any of the negotiations?
I would have a weekly telephone call with someone in the City of Edinburgh Council, to try to get an update. The reality was that the city was obviously at an impasse about whether it could support the proposition. For weeks the response was the same: “We haven’t resolved the issue or come to a final conclusion.”
I sympathise, given the position that you were in. As directors you knew that you had a legal and financial responsibility and you felt that you had some kind of moral responsibility to the people who were affected. You were attempting to communicate with those people, but no one was willing to tell you what was happening in relation to the company’s future.
It is important to note that our clear understanding was that the Government would take care of the public sector debt with the proviso that the City of Edinburgh Council would come to the party and take care of the commercial debt. The Government was clear, and we were clear, about its role in all that. I suspect that the Government, like us, had to wait for the city to come to a conclusion.
But even if it was the case that the Scottish Government would deal with the public debt, the City of Edinburgh Council would deal with the private sector debt and the Government was waiting on the City of Edinburgh Council to come to a decision, that does not square with the communications trail, which shows that the Scottish Government was writing the press releases and was very much in the driving seat about what would be said and what would happen. Leaving aside all the misunderstanding about who knew what, it is clear that the Scottish Government was driving matters. This is not for you to answer for, but there seems to have been a very different relationship at that time. The Scottish Government was firmly in control. However, we will take up that point with the Scottish Government.
I just want to follow up Jenny Gilmour’s remarks. She helpfully said that she was called to St Andrew’s house to be given sight of a press release. Who was present at that meeting?
Again, I would need to refer to my notes for that.
Who was present from the city? Was Steve Cardownie there?
No, Steve Cardownie was not present.
Was a council official there?
I would need to refer to my notes on that.
Who called you to ask you to attend the meeting? Who phoned you up to say, “Come and have a look at this press release”?
A Government press officer, I think.
A Government press officer?
There were a couple of press officers, so I assume that one of them represented the city and the other represented the Government.
Our understanding is that the press release was drafted by the Government press office. Is that your understanding?
I had to make the assumption that the city had had something to do with the release.
However, we now know that council leader Jenny Dawe had not seen the release. That is what I understand to be the position.
We do not know.
The press release was issued on 15 October.
That is correct.
Did your meeting take place on the day that the press release was issued?
Yes, I think so.
So you were called into a meeting on 15 October to be shown a press release, which was issued that very same day. In the words of the Auditor General, that press release
We certainly did not interpret it in that way. We clearly saw that the city—to our great relief, too—would come to the party and fulfil its side of the arrangement.
The Auditor General states that
If I may, let me say that the misinformation to which you refer was misinformation between officials in the city. As far as Jenny Gilmour and I were concerned—
No, I am not blaming you in any way.
As far as we were concerned, the information that was being released about The Gathering was correct.
It is important to put it on record that you went into that meeting in good faith. Where the press release referred to how the public and private creditors would be handled, you accepted at face value that the press release indicated an intention by the City of Edinburgh Council and the Government to do the right thing by your creditors.
That is correct.
I am glad that the convener has clarified that. In case anyone misunderstood, I did not intend in any way to blame either Jenny Gilmour or Lord Sempill. You were called in at short notice and given the press release, which was issued the very same day. You would not have known, but in fact the press release followed a series of meetings involving ministers and a series of contacts between ministers and the Royal Edinburgh Military Tattoo, VisitScotland, DEMA and Scottish Enterprise. All those were attempts to try to find someone to take over from you. This misleading press release followed that sequence of events. Is my understanding of that right, as far as you are concerned?
That is our understanding. We were not at those meetings.
You were not at any of those meetings?
No. We were not privy to those discussions.
You were not involved in any of the discussions that were taking place between ministers and third parties—behind your back, effectively. You were called in, and the misleading press release was issued.
As we are coming to the end of the question session, it is worth acknowledging a number of things. First, this has been a long and tough session—and a long and no doubt personally difficult year—for both of you. Secondly, you both have strong professional track records; I know that because I have read up on you.
That figure of £10.4 million was actually challenged last week in evidence to the Economy, Energy and Tourism Committee, in which it was stated that the figure was only about a quarter of that. That was after nearly £5 million was spent by the Scottish Executive to publicise homecoming 2009 and the gathering. The return on investment was not very high.
Okay. You have both had your chance to put things on record.
When did the Scottish Government and the other public sector bodies that were owed money by the company write off those sums—the debts—that were due to them?
We do not know.
We are not certain of the specific dates that relate to that. The process was that the Government—
Sorry—your company owed that money, but you are telling us that it was not informed of the write-off process?
We were eventually informed that the Government intended to cover the public debt. The discussions happened at ministerial or Government level, and they must have decided among themselves that they would waive the debt. There was a clear understanding, however, that that was with the proviso that the commercial debt would be met by the city.
But on page 18 of the report, exhibit 6 lists the amounts that were written off by public sector creditors. It gives a total amount of £291,508.
Yes. Eventually, once the city had decided that it could not pick up the commercial aspect of the debt, the original arrangement that the Government had structured—I am making assumptions here—with the other public bodies ceased, and those bodies in turn became creditors.
So those debts were never written off.
Not as we now—
They remain as—
They are claims on the creditors list—they are on the list. They have lodged claims to try to recoup some public funds.
Okay—that was not clear to me until now. So everything was structured to allow the public sector to write off those amounts, but they were never written off, and so those bodies are part of the list of creditors.
They sit on the creditors list.
Okay, that is helpful.
The sum of money from WorldPay came after one week. On the Monday—not the Monday post the event, but the following Monday—the money came into our account. The amount was just under a quarter of a million.
We can give you an exact amount if you like.
Around £250,000?
Yes.
Under your contract with the Scottish Government, you were under a liability to repay that money to the Scottish Government within 14 days or by 31 August, whichever was the earlier.
Correct.
Yes.
So why did not you do that?
We obviously had other costs to meet as well, and we took a decision to pay some of those other costs. Eventually, the money was not there.
Did anyone from the Scottish Government contact you to remind you that the money was due?
No.
You had still not gone into administration at that point.
We informed the Government that we could not pay it before the deadline.
From that date of default until the issuing of the joint press release by the council, the Government and EventScotland, did you make any representations to or have any contact or communication with ministers?
Yes.
Of what nature?
The first body that we went to was EventScotland; that was the procedure. It opened the door for us to have a discussion with ministers, and we had such a discussion. By then, we had drafted the reality of the bottom line and it was a question of looking at those figures and seeing to what extent there were options to rescue the situation.
I think that you said earlier that you were not involved in the discussions that are listed in the report. You said that you were not involved in those meetings with ministers, but I am asking about discussions or communications of any kind that you were involved in with ministers. Can you tell us what those were?
We had—[Interruption.]
Not Mike Russell?
Not at that point.
I do not think that he was at that meeting.
We can clarify with the Scottish Government what subsequent meetings took place with ministers that are not recorded in the report. It may well be the case that they are all recorded in the report, but we will seek clarification of that.
Obviously, the witnesses could tell us the dates of those.
The initial outcome was very much one of, “We will have a really good look to see what we can do to try and help retain the integrity and the legacy that you have created.” They made it clear to us that it was a substantial loss and that they were not certain how easy it would be to deal with. We were not party to whatever discussions took place subsequently.
Those are the ones that are listed.
Yes. Then they held a series of internal discussions and eventually, as I think we discussed earlier, they went down the route of a joint partnership relationship, which it was hoped would involve the city, but that never transpired.
Thanks very much.
Before we conclude, Jenny, can I just clarify that you are a director of Red Sky at Night?
Yes.
And Red Sky is one of the listed creditors.
Yes.
You personally are one of the creditors.
Yes.
I thank you both very much for coming along. It has been a long session—longer than anticipated. I appreciate that you have been caused some anxiety and that it has been a difficult time for you, and I value your attempts to provide as much information as you have been able to. It is clear that some of what has transpired is your responsibility as far as the conception and the management of the event are concerned, but there are other things that have happened subsequently that others will have to answer for and which we will attempt to find out about.
“Emergency departments”
The next item is consideration of a section 23 report entitled “Emergency departments”. Before I invite the Auditor General to give us a briefing, I note that Caroline Gardner is with us. She will not be here again for a while because, as members might know, she is taking up a secondment to the Turks and Caicos Islands.
Indeed.
I can tell you a thing or two about that.
Don’t, George—your microphone’s on.
Suitably, she has waited until winter approaches before deciding to depart. The appointment is significant—the Administration there has been in significant financial difficulty for a period—and I am sure that Caroline Gardner will relish the challenge.
In this case, I think it right and appropriate that Caroline Gardner should introduce the “Emergency departments” report.
From accident and emergency units to the Caribbean, eh?
I am afraid that there will be no fact-finding visits, convener. I thank members for their good wishes.
Thank you very much, Caroline.
It is difficult to define exactly which patients need to be in emergency departments and which patients do not. Our estimate is that a little over half of the people who turn up at an emergency department could be classified as having minor injuries or illnesses, rather than the serious ones for which those departments are designed. The question of where else those people might have gone is a complex one, however. First, patients do not always know about the alternatives that are open to them. Secondly, the number of patients who arrive at emergency departments who are referred by either general practitioners or NHS 24 is very small. It is about 4 per cent for NHS 24 and 10 per cent for GPs. The whole question of who is being treated in emergency departments and whether that is the best place for them is ripe for exploration, and that is one reason why we are concerned that the NHS is not collecting better information about the patients who arrive and the quality of care that they get.
I anticipate that the committee will wish to examine this subject more closely, but is there anything that members wish Caroline Gardner to clarify at this stage?
I have a follow-up question on the point about changes to GP out-of-hours cover. The report contains a helpful discussion on the matter at page 11. There has been a 9.4 per cent increase in attendances at emergency departments over the past 10 years. You acknowledge in paragraph 23 of the report:
We say that we cannot tell. At the moment, it is not clear that patients are being treated in the right place. More than half of them appear to have minor illnesses and injuries, rather than more serious ones. On the other hand, only 10 per cent of patients are being referred by their GPs, and that figure has not changed significantly over the last period. There is a question there.
It sounds like the BMA is putting a bit of a spin on your report that is perhaps not justified.
Its comment certainly goes further than we have gone.
I was interested to note a reference in paragraph 49 to the cost of patients who attend emergency departments but who leave before receiving treatment. The report says that, in 2008-09, 9,500 people were
I will ask Claire Sweeney or Angela Canning to answer the second part of that question. On the overall picture, you are right to say that it is an extraordinary figure. We know that the situation is more complex than it looks, however. We know that some of those patients will have been removed from emergency departments by the police—they will have been brought in drunk and when they started to come round they will have caused a disturbance and been removed. It is a complex picture.
There is a general point in the report about the need for education for people using the service. A lot of work has been done to explain to people which services are available, where they can go and when they should use them. There is a message there about how people are using services.
I have worked in accident and emergency departments and alcohol consumption has a great deal to do with it, although people get the chance to sober up during the four hours that they sometimes have to wait.
Claire Sweeney will pick up on that.
One of the challenges that we faced with the report was trying to build up a picture of who is using the service. It comes through quite clearly that there is little information available about what is coming through the door. Even the triage categories are very broad. It is difficult to get a handle on complexity and case mix. We struggled with that because the information is just not there at the national level. We were not able to go on to make some of the conclusions that we would have liked to have made about the impact of the complexity of the work on cost, activity, and cases seen per staff member because the information is not collected in that way—it is not available.
Information is collected that way in the hospitals, so I am quite surprised that it is not made available. I imagine that the health boards collate it in some way, but I do not know whether it goes into national figures.
There is something. Two exhibits in the report give indications about triage and the condition in which people come through the door, but they are such broad categories that they are relatively meaningless in terms of our trying to understand which patients could be seen in, for example, a primary care setting. It is difficult to see that from the information that we have.
Exhibit 13 mentions Monday and Saturday attendances. Apart from the period between midnight and 8 o’clock in the morning, attendances are higher on a Monday than on a Saturday. That seems to be counterintuitive.
We also thought that that looked odd. The pattern is the same in England and it appears to be because of patients who go to their GP on a Monday morning and are found to be ill enough to require referral at that stage. That is particularly true of elderly patients.
Thank you for that. We will come back to the report at a later point in the agenda, and when we come to our conclusion, you will be somewhere warmer, Ms Gardner.
I will be thinking of you.
I am sure that you will. Good luck; it is a fantastic opportunity and I am sure that you will do well.
Next
Section 22 Report