S T A N D I N G C O M M I T T E E O F T Y N W A L D C O U R T O F F I C I A L R E P O R T
R E C O R T Y S O I K O I L B I N G V E A Y N T I N V A A L
P R O C E E D I N G S D A A L T Y N
ECONOMIC POLICY REVIEW COMMITTEE
DEPARTMENT OF ECONOMIC DEVELOPMENT
HANSARD
Douglas, Thursday, 3rd December 2015
PP2015/0168 EPRC-ED, No. 1/15-16
All published Official Reports can be found on the Tynwald website:
www.tynwald.org.im/business/hansard
Published by the Office of the Clerk of Tynwald, Legislative Buildings, Finch Road, Douglas, Isle of Man, IM1 3PW. © High Court of Tynwald, 2015 STANDING COMMITTEE, THURSDAY, 3rd DECEMBER 2015
Members Present:
Chairman: Mr M R Coleman MLC Mr G R Peake MHK Mr J R Turner MLC
Clerk: Mr R I S Phillips
Contents Procedural ...... 3 EVIDENCE OF Hon. L Skelly MHK, Minister, and Mr C Corlett, Chief Executive Officer, Department of Economic Development ...... 3 The Committee sat in private at 3.37 p.m...... 19
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Standing Committee of Tynwald on Economic Policy Review
Department of Economic Development
The Committee sat in public at 2.30 p.m. in the Legislative Council Chamber, Legislative Buildings, Douglas
[MR COLEMAN in the Chair]
Procedural
The Chairman (Mr Coleman): Good afternoon. Welcome to this public meeting of the Economic Policy Review Committee, a Standing Committee of Tynwald. I am Mike Coleman MLC and I am the Chairman of this Committee. The other Committee members are Juan Turner MLC and Mr Ralph Peake MHK. Also with us is our Committee Clerk, 5 Mr Roger Phillips. If we could, first of all, ensure that mobile phones are switched off, as they interfere with the recording equipment. Also, for the purposes of Hansard and the Tynwald Listen Live facility, I would kindly ask that we do not have two people speaking at the same time. The Standing Committee is taking evidence today on matters relating to the Department of 10 Economic Development. We have with us from DED the Minister, the Hon. Laurence Skelly MHK, and Chief Executive, Mr Corlett. This is a special session, as we will be covering two topics. The first topic is the shelved TT World Series initiative, and this will take place in public. The second topic is banking facilities available to commerce in the Isle of Man, and this will be held in private. The last time the Department of Economic Development gave evidence to this 15 Committee was on 16th September 2015, which was the scheduled annual catch-up session. So again, welcome, Minister and Mr Corlett.
The Minister: Thank you.
EVIDENCE OF Hon. L Skelly MHK, Minister, and Mr C Corlett, Chief Executive Officer, Department of Economic Development
Q1. The Chairman: Before we begin, I would like to express my concern that the information 20 requested by this Committee on 19th November was only made available to the Committee late yesterday afternoon. We now have the minutes of the 29th, but the minutes of 29th September were not included originally, even though it was so vital. That was the date of the meeting which decided to shelve the project. We now have it and are happy. Late delivery of papers without leaving the Committee Members sufficient time to read them 25 and omission of an important minute at that time could be regarded as discourteous to this
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Committee and thereby Tynwald. I was advised to change the original word that is now ‘discourteous’. I actually had put down ‘contemptuous’. The minute of 29th September ... As I have said previously, we are prepared to guarantee that this minute will not be published, bearing in mind that this Committee has also dealt with 30 the Sefton and matters like that where private information was given to us and it was not declared to anybody. At our annual session on 16th September your comments regarding the TT World Series were, to say the least, bullish, and left us with an impression that the initiative would come to pass. Thirteen days later, on 29th September, the TT Series was discussed at a Department 35 meeting and the project was shelved after incurring a cost of £332,049.22. It behoves this Committee to determine, amongst other things, if an earlier go/no-go decision would have been possible, which could have reduced the project cost. Minister, what happened between 16th September 2015 and 29th September 2015?
40 The Minister for Economic Development (Mr Skelly): First of all, may I apologise on behalf of the Department for the late submission of the information that you requested. That, very simply, was our failing; however, we did have some critical absences in our Department, most notably one of our colleagues having a bereavement in the family and one of our senior management in hospital. So I do apologise for that. I would have wanted it much earlier for you 45 to digest and I want to make that unreserved apology. What has happened in those two weeks is a very valid question, but I think what we must do is put things in context first and foremost. We are talking about a project here that had its start back in 2010 – two Ministers ago, and a previous Chief Executive who is not here now as well. There were a number of commitments, particularly financial commitments, and different phases 50 of the project that were ongoing, and at all the particular times in the Department, whether that be the existing Department or the Department as back in 2010, both politically and executively, the information that was drawn from the evidence, from the feasibility study all the way through to the tendering process, said we must test the market. What we did do, finally, on 29th September, is we made a political decision that was, as 55 stated publicly, to shelve the TT Series. That journey, which clearly was a long journey and clearly gained an awful lot of evidence, gave us, really, the knowledge, and we believe – and I say ‘we’ believe as a Department, both me and the Members – that we made the right decision at that particular time. The principal reason for that was that we felt that the TT Series still had merit; however, what we wanted to do was to focus solely on the local events. 60 Through the various pieces of evidence that were amassed over that period of time we believe there is still significant growth to be obtained in both the TT event, the classic event, and obviously going into the Festival of Motorcycling. At that particular stage we started out looking for a TT Series that would be global. At the end, we decided that we wanted to still subcontract that out: put it into a private promoter’s hands to take it to the next stage of growing the event, 65 we believed, substantially and significantly. That is why we had to make the decision to no-go with the TT Series and start a new procurement process, which we have just begun. That is principally the decision that was made on 29th September by the Department.
Q2. The Chairman: At that time you received, what, two major bids for the thing? 70 The Minister: When we shortlisted, we had three shortlisted companies that were coming forward. One fell by the wayside for a number of different reasons, and we were left with two principal tenders to review, which we did review extensively. It was done most clearly from an executive level and also the consultant level, which we did at two different stages, and then of 75 course there was the presentation to the Department, i.e. the political Members, on 29th September.
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We had, I would suggest, a very robust debate within the Department to review exactly what the options were in front of us, and, as I stated, we made that decision not to proceed with either of those particular tenders but to actually go back to market for a private promoter to 80 grow the local event and focus on the local event.
Q3. The Chairman: This is rather sensitive: I am led to believe that the two bids included names of your own staff.
85 The Minister: That would be speculation. I think it was recognised ... What I could say is that not just those two bids but probably several other bids would recognise that we had expertise within the Department that would be valuable should one of the tenders be successful. Of course, that would only be speculation and any agreement I have absolutely no knowledge of whatsoever, but it was identified that we had expertise within our Department that would be 90 probably critical for anyone if they were successful.
The Chief Executive Officer (Mr Corlett): If I might add – if I may – part of the intent of this was always to transfer part of the activities for running the TT to a private party. That was always part of the intent, and so this would provide continued employment for a number of the 95 staff by transferring to that private organisation, because they have amassed, as the Minister says, a great deal of knowledge about the detailed operation of the TT. What I will say is that only a small number of senior officers were involved in the procurement process. None of those officers were involved in any way with either of the bidders in preparing their bids or in any way assisting them. Hence the issue we had ... And may I add my 100 apologies for the lateness of giving you the material. There were only a small number of senior officers who were involved in the evaluation process, and therefore the junior officers who may have been mentioned in some of the ... were in no way a party to the procurement process and therefore could in no way influence the procurement process.
105 Q4. The Chairman: But, presumably, if their name has been mentioned in the bid then they have had contact with the bidders, and therefore, theoretically, they had the ability to slant perhaps for their own benefit.
Mr Corlett: As I said, all along the intent was to transfer some staff, who were doing some of 110 the operational aspects, to the private party, so we were expecting the bidders to express an opinion whether they saw that that was desirable or feasible. We did expect the bidders to say whether they saw the transfer of some of our staff as part of their plans or not, and so it was helping us to clarify their intent so we could plan how we would manage our staff as we would implement the potential partnership. 115 Q5. The Chairman: I make the same point: the fact is if your staff have been talking to the potential bidders such that their name is going to be placed in a bid, then there is the opportunity for perhaps slanting things in a particular way, a bid in a certain way, such that you can say, ‘If you push this side, then it might be more favourable.’ 120 I will ask the final question: are you quite happy that those relationships did not taint the bidding process?
The Minister: As Minister, I feel comfortable. Noting obviously there was certain expertise that was identified and it was identified in several of the bids – not just the final two, but in 125 several bids – what we did do was we ensured, as Mr Corlett stated, that at that particular level those people would not have any involvement with the process that was ongoing, and that was done by The Sports Consultancy (TSC), which everyone knows, reporting to the officers.
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One of the reasons we had an extra layer of consultancy advice was that we wanted to ensure that we had that level of independence in terms of a view and the recommendation that 130 was put forward.
Q6. Mr Peake: Mr Corlett, you say there are some experts there with knowledge that would be valuable to the preferred bidder, or the winner. Were those services offered to all people who expressed interest? Did they actually –? 135 Mr Corlett: Absolutely, from the outset. We have said the intent was to find a private partner to help us run the TT. A private organisation with suitable expertise, suitable investment, could help us grow the TT and could help us potentially to set up a TT Series. So it was the intent all along to see could we transfer some of the activities the Department does in house to a private 140 organisation. When we look at the TT it is quite exceptional in terms of what we do. Everywhere else, we seek to create the environment for the private sector to grow, not for us to do their job for them. We do not run gaming companies, we do not operate manufacturing businesses, but we do run a TT motorsport event. It is most unusual. We are seeing that there is potential for the 145 right expertise with the right investment to help us grow the TT and, as we said, potentially the TT Series. So, yes, it was always the intent, consistent with Government’s principles of smaller, simpler Government, that we would shrink the size of the team, following this arrangement.
150 Q7. Mr Peake: Is it the Department’s policy, then, to take its employees and place them in private businesses? Is that what you are trying to do? Do you attract businesses here and then say, ‘We’ve actually got some personnel here you can then take on’?
Mr Corlett: As I say, the TT is quite exceptional because we, Government, have been running 155 what would normally be run as a private event. It is very exceptional to have a motorsport event of this nature run by a government in the way that we do. Hence, we thought there was an opportunity to bring in a private partner who could help us grow it and help us invest in it; and by stimulating private investment, that would enable taxpayers’ money to be used elsewhere, where it would normally be used in education and health etc. 160 The Chairman: Mr Turner.
Q8. Mr Turner: You say that this is unusual, but I do not think it is; because up until round about 2006, the Auto-Cycle Union (ACU) owned and ran the TT, and the Government, in their 165 desire to take control of it, actually purchased, I think it was for 20 years, the TT. It begs the question why did they want to do that if they are now complaining and want to offload it. Why did the Department or its predecessor purchase, lease, however it was set up, the TT when the Auto-Cycle Union were running it themselves up until around about 2006? Then there was the situation with the accident at the 26th milestone, which resulted in the ACU being paid to come 170 back and run it for you. Does this not show that, actually, the previous position of the Auto-Cycle Union running the event was, in fact, the best option? And has that not been considered – going back to the Auto- Cycle Union running the TT – because it is, at the end of the day, their event that we are only licensing? 175 Mr Corlett: The ACU is not actually operating it. There is a sub unit of the ACU, ACU Events, which helps us conduct part of the TT, but the marketing of the TT – the attraction of visitors, the maximising of the economic benefits – they play no part in that, but we do and we work with the private sector to maximise the economic benefits, to maximise the taxpayer’s benefits,
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180 because that it why it is run. It is not merely run as a motorcycle event in and of itself for its own end; it is run because it adds economic and fiscal value to the Isle of Man. What has changed since 2006, of course, is the fiscal position that Government finds itself in. We lost a third of Government income, and therefore we need to look at every available opportunity to deliver fiscal savings for the taxpayer whilst stimulating economic growth and 185 generating more Government income. We believed, and the research indicated, this could do precisely that – that we could potentially, through the Series, grow the economic benefits, grow the return to the taxpayer while transferring some of the obligations and costs to a private party. Therefore, there were significant benefits that warranted us pursuing this process.
190 Q9. Mr Turner: But you already had that before 2006 – the Auto-Cycle Union were running the TT, and you bought it off them. So what I am saying is not only did you then pay them to take it on for the Isle of Man Government to control it, but when it all went wrong – in 2007, I think it was – you then had to contract a wholly owned subsidiary of the ACU back in to run it. So it has been a double financial whammy for the ACU. 195 Have you considered going back to the stage where the ACU have the TT back and run it? Therefore there will not be the costs to the taxpayer, apart from the marketing. It effectively achieves what you were trying to set out to do.
Mr Corlett: We believe the ACU Events is operating that element of the TT that we wish them 200 to operate perfectly competently, so we are satisfied with that. Indeed, the Chief Constable no less has commented on how much safer and more effectively operated the TT is today than it was say 10 years ago. So we believe that we are operating a better event than we have ever done before, a safer event than we have ever done before, an economically and fiscally more successful event than we have ever done before. But we always need to look for opportunities 205 for improvement – always. We have a duty to the taxpayer to do so. So we think, given the current fiscal position, we had to look at all opportunities. We think the TT has been a great success in recent years and with more investment it could be bigger and better still, and yet we, the Department, are not in a position to make that investment. But the private sector could potentially make that investment, so if we find the right 210 private partner, who is willing to work with us, we could make the TT and the Classic TT even bigger and even better: better for the economy as a whole – for accommodation providers, shops, others, and for the taxpayer. We think that is a very real and credible possibility, and all the information we saw in the procurement process to date indicates that that remains the case. So, while for the TT Series itself, as the Minister said, the Minister and Members, on careful 215 reflection, felt the risks were too great, we are convinced that there is potential to have a private partner to genuinely help us run this bigger and better.
Q10. Mr Turner: How much were the ACU paid to buy the TT off them in 2005, 2006, or whenever it was? 220 Mr Corlett: I cannot say. I was not around at that time; I would not know. I am sorry.
Q11. The Chairman: Can we get back to the World Series, which is, I think, what we brought them here for – if you don’t mind. 225 In the minute of the 29th, which I have quickly read, it says that the Members of the Department were disappointed, at the bidding stage, at the size of the organisations; you did not actually pick any big hitters. And then it says that they felt unable to get involved in the TT due to the associated high risk of death. Do you think that that would extend to the TT and your going out to market? 230
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The Minister: It is. There were a number of parties. There were three shortlisters, and the one that fell by the wayside did actually cite that as being ... One of the issues was gaining a credible media partner that would be willing to actually show this event. So yes, that is one of the issues that we have to consider. 235 In terms of big hitters, really I guess what Members were expressing there, shall we say, was household names. However, what we would suggest is that when you talk about big hitters you also need to think about the level of investment, and what we were aware of, in terms of the credibility of these particular bids, was they were seven-figure investment tenders that were prepared to actually put into the promotion of the TT should they be successful. 240 So we did our due diligence at that particular level, but it was really the name recognition ... which is where that comment actually came from within the Department meeting at that time.
The Chairman: Mr Turner.
245 Q12. Mr Turner: At that time, it started out as a TT World Series. The name ‘World’ was dropped. I had raised with the Department, in the presentation we had from the consultancy that was over, what discussions had taken place with the governing bodies. We were told at that discussion that we did not need to discuss with them. That was right back in the very early days, and very shortly afterwards, on 13th February 2015, a letter went out to Tynwald Members 250 stating discussions had been raised with the ACU and the FIM and the word ‘World’ had to be dropped. Do you think, in hindsight, a lot of this work could have been saved if discussions had taken place with the governing bodies to find that this idea actually was not viable in the very first place? 255 Mr Corlett: I think the inclusion or exclusion of the word ‘World’ makes little tangible difference to the commercial proposition. We have taken advice that potentially we could have used the word ‘World’. But the ‘TT Series’ ... we simply referred to it as that as a working title, to have something non-contentious 260 while we worked up through the procurement process. Indeed, partners were expressing the desire to use the full ‘World Series’, and that was a possibility and we have taken some advice that we could probably do so. But just so that we had something suitably non-contentious while we were going through just the working stage, looking at it as a possibility, we were using the ‘TT Series’ title to try and remove as much controversy as we could from an item which seems to 265 attract so much interest already.
Q13. Mr Turner: The fact is you would have had no competitors because they are all licensed by the governing bodies. A championship or a series requires a permit from the governing body, and you stated you did not need that. So there would be no competitors to compete in your 270 World Series because they are prevented from doing so by virtue of their competition licence. So how, defying the governing bodies, would you have actually had a series to run if you had no competitors?
Mr Corlett: We have taken advice and consulted with the relevant parties. We believed we 275 could proceed with a series; we believed that that was possible.
Q14. Mr Turner: Without competitors?
Mr Corlett: We recognised there would need to be some negotiations with national parties, 280 so if we wanted events in different countries around the world we would need to involve the relevant country bodies at that time – which is one of the complexities of this. This is quite a big, quite a complex idea. It is not an easy thing to consider or to establish. So yes, individual
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countries, individual regulators would need to be involved at that appropriate time. We have not reached that stage yet. 285 So, with the help of The Sports Consultancy, we made some tentative approaches to a number of countries, a number of cities, a number of bodies who had indicated their interest in participating in such a series; but of course it was a tentative interest. Until we had a firmer proposal it was hard for them to say yes or no, but we had warm responses from a number of parties around the world, which led us to believe that yes, we could potentially get riders from a 290 number of locations and organise competitive and exciting races in a number of locations.
The Minister: The advice that we were given, both legally and professionally, was based on how we operate the TT right now – clearly, without FIM status – and on that basis we would be able to operate a similar model in other jurisdictions. That was the advice that we were given 295 both legally and professionally.
Q15. Mr Turner: But who gave you that advice? Because, as I understand it, for all these events to form part of a series, that would breach the codes that those individual bodies, like the ACU ... They are subscribing to the FIM, and for those events they would be in breach of their 300 obligations to the FIM, so that would also thwart any chance you have got of holding those events in a series, as it would put them in direct breach of their obligations. What I am saying is: why weren’t discussions taking place with the governing bodies at such an early stage? And who gave you the advice that you did not have to bother with them, despite the rest of the world and every event held around the world being through the affiliated bodies 305 of the FIM and the regional ...?
Mr Corlett: The fact that, of course, it is road racing and not circuit racing is a key factor in this, and we had had discussions with the ACU and with The Sports Consultancy and with relevant legal advisers. 310 Q16. Mr Turner: Can I just stop you? Your road racing circuits do require a track licence from the governing bodies.
Mr Corlett: I am not an expert in this, but we have consulted individuals who are, and so we 315 have what we believed was reasonable evidence to say that it was possible. And of course at this stage this was still just a theoretical concept, so we had not progressed on to the practical issues. If we had appointed a partner, we would have then, working with them, had to go out to appropriate countries and cities and appropriate locations and work with all the relevant regulatory bodies to make it work. So it was always a very, very big venture which had many, 320 many steps before it would be fully implemented. We never denied that.
The Chairman: Can I just ask that we move back. This is not about motorcycling; it really is not. What we are here to do is we are looking at the process. This could be for anything, and I think we get diverted if we start looking at the actual product itself. 325 Mr Peake.
Q17. Mr Peake: Thank you, Chairman. Just getting back to the process, you kindly submitted the timeline – very useful. As you say, it goes back to 2010. Going through there, two thirds of the money that you have currently 330 spent – that is around about £220,000 – was spent before the start of this year. So you have spent a third of that budget since then. You referred to these experts: how long have they been employed with DED?
Mr Corlett: Sorry, are you referring to The Sports Consultancy, who have been assisting us?
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335 The Minister: TSC.
Mr Peake: Yes.
Mr Corlett: TSC have been helping us since back in 2011, so they are very familiar with the 340 TT. It is a very experienced sports consultancy which has given advice on the commerciality of many different sporting events. They worked with the London Olympics, for example, among others, and we secured them following a suitable procurement process. We were satisfied that they had the relevant expertise necessary to help us through this complex process.
345 The Minister: And it is fair to say – if I may just add to that – what we were very conscious of, and I believe previous political Ministers and Members of the Department were very conscious about, is the value of what the TT is. What we are talking about here is a global sports franchise, effectively. What we needed was the appropriate expertise to be able to guide us through the particular process, and that is why, as Mr Corlett stated, we went through a procurement 350 process to actually put them in place. And they have, I would say, done a very good job to be able to give us the analysis and present the evidence that gave us the opportunity to complete that task, which of course just was done at the end of September.
Q18. The Chairman: I would like to go back a little bit to some of the comments about the 355 very start of this process. In your notes to us, Mr Corlett, you actually say that this had been going on for a very, very long time. Explain to us again just what tipped it over to make it actually start running.
Mr Corlett: I think the feasibility study was the big event. The feasibility showed that yes, 360 such an event was viable; that there was a window of opportunity in motorcycling events that meant that a product could work; that there was interest from cities all over the world seeking to place themselves on the world map and gain publicity, and that motorcycling events such as this could aid them promote their city, particularly in the developing world, where we are seeing rapid growth in the Middle East, Asia etc., and that could help promote the Isle of Man in 365 locations where there are great business opportunities. So there were all sorts of interesting synergy benefits. That study definitely showed there was potential in it. And then we discussed it at –
Q19. The Chairman: I am after the point at which you said, ‘Let’s write to Clive McGreal’ – 370 which was in August – ‘and say ,“Please, can we have £100,000 to do this?”’ The feasibility study came out of that. (Mr Corlett: Quite right.) What made you start off?
Mr Corlett: Yes. Just as a point of detail, that was my predecessor, of course, Mr Kniveton. The Department had considered options for some years, and individuals from the private 375 sector had approached the Department, saying, ‘We really think the TT is a very proven brand.’ Indeed, one sports branding expert described it as the best, yet least utilised sports brand there is currently today – the least maximised sports brand there is. And so the private sector were saying to the Department, ‘We really think there is something in this, and, if you look to have a franchise utilising the TT brand, there are economic and other benefits in this for you.’ 380 So the Department had to take that seriously, but the only way, for something that is so specialist, is to get a suitable specialist analysis, a feasibility study. So the Department raised that potential with Treasury, who ultimately were satisfied that was the best way forward and authorised the money from the Marketing Initiatives Fund.
385 The Minister: I think, Mr Chairman, it was anecdotal, most of that discussion prior, the various amounts of interest. But one of the things that really stuck in my mind was speaking to
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various parties, both those with really inbred TT DNA and those literally round the corner in Strand Street, who had basically picked up on the fact that what was achieved in 2007 ... And if we remember back, prior to 2007, most people were talking about the death of the TT: this 390 would be the last big bang, an opportunity to celebrate the TT. And health and safety ... As Mr Turner pointed out, there were some terrible tragedies. How could we possibly manage that going forward? Two thousand and seven, really, I think, had the TT reawakening, in terms of its real benefit, and there was a body of work done that actually put the economic benefit on the TT. And as the 395 TT was on the ascendancy and motorsport on the ascendancy, whereas most of its competitors were going in the opposite direction, this said ... We have all recognised this. Everyone in the Isle of Man, we do have TT probably in all our DNA somewhere, whether we like it or not, and we always talk about it when we travel. How do we take that interest and see whether we can maximise and grow that momentum? That is where, basically, we said, ‘We need to do a 400 feasibility study and see if there is really any merit behind all that anecdotal information.’ That is what started it, and then it grew from there. For me, as Mr Corlett just pointed out, one of the real ... and I still ... You mentioned I was a bit bullish about it. I still believe in this as an event. I still believe that there is a great opportunity to promote the Isle of Man through a TT Series. However, I really want to see us maximise the 405 economic benefit of the event here locally, and I do not believe we have achieved that at this particular stage. Lastly, I would say I do not believe we, as a Government, are actually going to do that, which is why we are going down the process of procurement again to look for a private promoter to taken on that next stage.
410 The Chairman: Mr Turner.
Q20. Mr Turner: First of all, the driver for that, did that come out of the Motorsport Division of your Department? Secondly, the TT was part of a series and was removed because of its danger: why did you 415 think a new series would be viable when the danger of the TT and the fact that riders were being compelled to compete in the TT was the very reason it was removed from the World Championship?
The Minister: Interestingly enough, I have had many conversions with the Chief Minister, 420 who was the DED Minister and, of course, will recall those days when he was Tourism Minister, when that attempt was made. A different era, and, as I have just described, what that era was ... where motorsport, and particularly TT, or road racing motorsport, was in a different realm altogether. Now, with this growth and this ascendancy, we felt that we were getting to the point where we were plateauing, this event here locally. This exercise has told us we have not 425 plateaued. We believe there is still growth in that. So it is on the back of ... And again, it is not just growing the actual single event itself; it is actually growing all the other opportunities around it. One of the areas which I was involved with, back in my day when I started in 2013 – actually, I was in the Department from 2011 – was speaking to a lot of people associated with TT Zero, 430 another event that was, at the time, being criticised and there were a lot of reservations about the value of this event. This has always been about promoting clean technology, and now the recognition that we have got on the back of that is really quite significant. What really woke me up to what the potential peripheral benefits of the TT Series would be is that when the TT Zero is in effect it is a one-lap event. Six-figure sums are invested in this for one single-lap test. They 435 want to come to the toughest course in the world to test their technology, rightly so. But they said, ‘If you went to other jurisdictions, where we could do multi laps, where we could actually expose our product to a wider audience, we would be very interested in investing in extra sponsorship and extra opportunities.’ That, to me, was to highlight where some investment into
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a new product and a new opportunity economically for the Isle of Man had big potential. Then, 440 the last thing, that really, I think, sealed it, in terms of where I thought it was, was when the business community said, ‘Corporate hospitality opportunities on the back of this would be absolutely huge and significant, and that is why we would like to get behind it.’ So this was all part of the evidence-building that was going on, that was provided each time we did an investment in this particular project. 445 Q21. Mr Turner: So what is stopping these other countries from just doing it anyway through their own local versions of the likes of the ACU?
The Minister: Good point. Nothing, absolutely nothing. 450 As we know, the UK is trying to introduce some legislation to have their own road races, but as we know only too well, trying to introduce legislation when we are going to have closed public roads is not so easy, and if you were to start again I very much doubt you would be able to do that. However, what we do believe, and the exercise actually demonstrated, is that there are 455 jurisdictions out there very willing to actually close their roads – albeit much smaller roads, perhaps not so populated and something quite different from what we are doing right here. That was also the other big part of where we were trying to take the TT Series. We wanted to retain the essence of it being a road race, with the paddock stops and so forth. However, it could not replicate what we have got here – a mountain course that has all the rare ... the challenges 460 and endurance issues around that – so we had to have it quite separate and we were very careful. We did not want to dilute the product, because that was absolutely critical. We were very much aware of what the golden goose was, and that is the event right here.
Q22. The Chairman: So, what you are really saying is that we need to privatise because we do 465 not have the money in the war chest to be able to do it ourselves: you develop it.
The Minister: Yes, in a very short answer. We believe it needs ongoing investment; there is no doubt about that. We, as a Department, clearly have invested in the events. We have seen growth – I think that is good evidence in its own right – and we have got to the point where it is 470 almost washing its face. There is a Question next week in the House of Keys regarding this – the gross value and the benefit – which I will be able to answer, but it is almost washing its face already. It is bringing in £27 million, I believe, in –
Mr Corlett: The TT and Festival together are £27.8 million to the economy and £5 million to 475 the exchequer.
The Minister: And, once more, when this sort of figure is relayed to other jurisdictions, they say, ‘You’ve got an event that almost washes its face financially and is generating that sort of local spend in your local economy: that is a huge economic success.’ So it really is something we 480 should treasure.
Mr Corlett: The evidence we have collected, talking to the other Departments, would indicate that it is approximately £5 million in fiscal benefit and £5 million in costs to Government in totality, not just to this Department but to Infrastructure, Health and the Police. 485 So, in summary, we are getting £28 million worth nearly of benefit to the economy at nil net cost to the taxpayer. That is a very significant economic boost, but we could, we believe, grow that economic benefit yet further if there was the investment there to assist us to do so.
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Q23. The Chairman: Coming back to the TT World Series – sorry, TT Series – timeline, was 490 there any time, prior to 29th September, that any doubt was raised in the Department, about continuing with the project, at the Department meetings?
The Minister: Yes. I think in all these ... Well, I have been involved, obviously, since 2011 in the Department, and I think right the way through the process the question was always there. 495 I think the biggest question was always about ... Logistics were a huge part of it, and I think the other one was ... The number-one topic always was dilution: what would happen; how would you dilute that product? A lot of discussion was around where it should be, because then you have got the reputational issue of various jurisdictions. We had direct approaches from jurisdictions from around the world, but what we wanted to be careful of ... and the whole focus 500 was about being equatorial and southern hemisphere – sufficiently far enough away that it would not actually impede the local event and would actually attract different audiences entirely, both locally and TV-wise. That was a big part of the discussions at every single stage. That was always taken up at every point, certainly from my involvement.
505 Mr Corlett: If I can just add – if I may absolutely reinforce that – at every step we looked at all the options and said, ‘Is it worth investing further?’ The feasibility study, as we have shown, was about £58,000, and that showed that there was definitely merit. We then did an expressions of interest process, which showed there were a lot of very interested parties. We then did the prequalification stage, where individual organisations have to show that they have the capability 510 to potentially do it, and again we were convinced that there were those who had done that. And then, finally, the tendering stage, and we had two very credible bids at the end of that, both of which we felt could have added a lot of value. As we have said from the outset to them, though, being a Government ... the threshold of potential reward to risk is always going to be higher for a government than a business. We are 515 always going to be more risk averse and more cautious because there are more stakeholders in our community that we need to be mindful of. The national interest is more complex and more difficult than an individual commercial interest. We feel that both of the commercial propositions were viable but we have to take into account the wider interests, so, the Minister remembers, considered it very carefully and at 520 great length before eventually deciding not to proceed.
Q24. The Chairman: Was that the first time that the Members voiced their lack of appetite?
The Minister: We all sit in Departments; I know what it is like. It has always been a very 525 robust challenge, I would suggest, and that is political probity that happens internally within Departments. So, yes. All I would say is it was consistent that we should consider particularly the dilution issue. I certainly wanted to be very conscious, and it was mentioned in some bids to do events fairly close – too close – to home, and clearly that would not be beneficial to our local event. So, whilst we felt that the brand was very strong and had a really positive opportunity, 530 that had to be a measured decision. Yes, it certainly always was, I would suggest, a high risk one, but what I would say is, completing the process, I do believe that there still is merit in a TT Series. However, in my personal view, I believe that that would need to be done in a fairly staged process, where you would probably test market – perhaps one jurisdiction that was a respected jurisdiction that 535 would fit in terms of maybe an exhibition type of event, just to start with. So focus on the local event and then tentatively look at the rare TT Series down the road – but that is my own personal view at this particular stage.
Q25. Mr Turner: I am still a little bit confused as to who owns the brand, which is what we 540 are saying the Department wants to exploit.
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I know the Chair was talking earlier about coming back to the TT Series, but I think it is important that the point I raised earlier, about the licensing of the TT from the ACU is clarified, because as I understood it, the ACU owned the TT brand and the Government have simply licensed it. 545 So can we have it clarified as to who does actually own the TT brand? The deal that was done back in 2006 is quite critical to whether the aspirations could actually be achieved. Can you provide the Committee with details of what that 20-year, or whatever it was – I am not sure whether it was 10, 15 or 20; I am pretty sure it was 20 years ... what that deal entails, because ultimately, I understand, that brand is still owned by the Auto-Cycle Union (United Kingdom). 550 Mr Corlett: We have an excellent relationship with the ACU. We have the capacity to use that brand. We have an existing licence and the ACU is very happy for us to use that licence. Possibly separate to this meeting we can provide further evidence, if you so wish, on that; but we do not have significant concerns in that regard. We have got a great relationship with the ACU. 555 The Minister: I take the point. If you are a private promoter considering it, you want to ensure that you have got the longevity and security of a brand that you can actually utilise, and we will certainly pick up on that point. In terms of our advice, I think it comes from our legal ... from the IP, because we did do some 560 investigation on the IP side of things, and part of the cost was the lawyers’ fees that are embedded within that £330,000-odd, so we will certainly be able to clarify that for you.
Q26. The Chairman: I just want to reaffirm you do not consider that at any time up until September you could have made a go or no-go decision. 565 Mr Corlett: In all honesty, no. The nature of this is very different from a normal procurement process. We were not buying stationery or office furniture, your proven products, simple products. We were buying, or seeking to buy, the expertise of a partner who could genuinely help us grow the TT and establish a new TT Series – really a remarkable new venture that would 570 need us to come up with a programme unique to our situation, a response tailored specifically to this opportunity – so the bidders had to invest a substantial amount of time and energy. Both bidders said they put six-figure sums into preparing their bids specifically for this tender. So, up until the point we had those tenders and had evaluated them in great detail in September, I honestly do not think we could have said yes or no any sooner. 575 Q27. The Chairman: Could the consultancy that you were using not have advised you earlier about the adverse reaction to the risk of death within it?
Mr Corlett: Oh, they did; they did at every stage. Even back as early as the feasibility study 580 they were saying that was a factor, and so throughout we were thinking what could we do to mitigate. So, for example, as I think I said earlier, today’s TT is far, far safer than it was 10 years ago. The health and safety and the knowledge that we have gleaned in the last 10 years means that we are running a safer event than ever before, and so we could bring that knowledge, that expertise, to help with the Series events. We would be specifically seeking cities, locations etc. 585 which were fully understanding of the potential risks and prepared to invest to mitigate those risks. So, absolutely, we thought about that at every step. As with most commercial ventures, there are opportunities and risks and you have to say, ‘How do I potentially pursue the opportunities while mitigating the risks?’ We sought to do that at every stage. But ultimately, to say we have got genuinely sufficient information to say yes, that particular 590 party with that particular plan – is that right to go, yes or no ...? We could only make that decision once all of the evidence was submitted in September of this year.
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The Minister: Yes, I think that is a reality check, Mr Chairman. It was given, particularly from those from the external, who were making these studies on our behalf. We live and breathe the 595 TT, we understand the dangers of it and, as I said, it is part of our DNA; but when you are external and you see what this really is – man and machine, and the danger that is connected to it – it is actually a double-edged sword, to be quite honest with you. Yes, it has a great economic benefit; however, there is an inherent danger with motorsport in general and this is probably one of the most dangerous, without a doubt. 600 Q28. Mr Peake: Thank you very much, Chairman. Just looking at the process again, how do you actually identify which option to go for? If you go back to the start of this in 2010, how many options were there? How many ideas did you have to pursue this? You have chosen to go down this route, but what other ones did you reject? 605 How do you sort the ...?
The Minister: There is a matrix. Essentially, we had a matrix process. Treasury were involved, as they were at that particular meeting, the final meeting on 29th September. That matrix had to take into account a lot of different components than normal matrix issues – reputational 610 issues, for example, we talked about before. The scoring was actually very close on the last two, very close, although different types of bids. However, in the selection process to get to that particular stage, one of the key qualifiers was funding. As stated previously, we recognise that this needs significant funding to go forward and, on that basis, we were looking at ... Bear in mind we were also looking at a profit-share 615 type of arrangement as well, because that was the other thing: what would the real benefit be going forward? Yes, reduced costs, reduced liabilities, but also we were looking to obviously increase revenues, and that would have been through a profit share; but initially this would require a significant investment, and that is why we were looking at a 10-year-long contract, so if anyone was considering investment they could consider what their ROI might be on that period. 620 But if we look at it from a pure investment basis, it highlights exactly where we should not be with the Enterprise Development Scheme, in terms of where we politically are charged with trying to be fair, open, transparent and go through an entire process, which would be quite different from the private sector; but because it is Government and because, particularly in this case, a very unique event, it had a lot of unique issues associated with it, which made it more 625 difficult, I think, to evaluate, to be quite frank.
Q29. Mr Peake: So, as Minister taking over the Department, do you feel as though you have done everything you can to bring this to a conclusion, to get a decision and to follow that?
630 The Minister: I would agree entirely, Mr Peake, because clearly it started an awful long time ago. There was a lot of work they had done, there was a lot of money that was spent, and the way I view it is that, effectively, we completely ... All that evidence said you must test the market, and what we did do is we tested the market, we tested this politically, robustly politically, and we made, effectively, a decision that we, as a Department – and it was a 635 unanimous Department decision that said this is the right decision for our economy and for the TT right here on the Isle of Man.
Q30. Mr Turner: Apologies for jumping around a bit, but that is obviously because we got a lot of this documentation at the 11th hour. I would be interested to know about the on-Island 640 expertise that was used, particularly in the early days of this. Looking down the list that has been supplied, it looks like a who’s who of everybody who is on the payroll. Why don’t we see on that list of people who were so-called expertise ... As I said, most of them are on the payroll in one way or another. Why is there no mention of any of the vast numbers of professional event organisers, international licensed stewards, clerks of the
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645 course, event promoters? Why do none of those people appear on this list, and all we can see ...? The on-Island expertise that have been giving you advice on this project are all people who are, as I said, effectively on the payroll.
Mr Corlett: It is interesting you would say that, because there was a very comprehensive list 650 of individuals consulted – I think something like 30 individuals connected with the TT, from the cycling teams through to the riders; we spoke to on-Island businesses such as Duke, which has expertise in this; the media, who are involved in this; and on our behalf, as part of the feasibility, TSC spoke to other countries, cities and sporting organisations. So there were an awful lot of parties consulted to see could a TT Series be a viable option. 655 Our focus is, of course, off the Island, because we are looking at a potential Series off the Island, rather than consulting with people who run the TT, because it was not about the TT; it was about could we create a series to run elsewhere. But we did consult very extensively with many individuals around the world to help us get to the end of the feasibility stage.
660 Q31. Mr Peake: I think Mr Turner’s point may be that all of this list of names is either involved in the TT or being paid start money as riders, so they have all got a very particular interest in the TT.
Mr Corlett: I think that particular list does not serve us well in showing the countries, 665 jurisdictions and other bodies that we have spoken to. I say ‘we’; that is the royal ‘we’ – that is TSC on our behalf as part of undertaking the feasibility study. So that is showing the individuals. It does not mention those other parties – yes, I readily accept that.
Mr Peake: Okay. 670 Q32. Mr Turner: But I think the point I am making is that they all had a financial interest in this investigation going forward, whereas ... In particular, I was asking the question about the on-Island expertise in terms of viability of events, event organisation and exactly what you are going to need to do to make this project work. There is no mention of any of those people. 675 The Isle of Man has a number of internationally licensed stewards. I am not going to name them, but some of them also were involved and very respected throughout Government. Nowhere do those names appear, and those, personally I would have thought, would be the first place the Department would go for some initial advice before embarking on a project like this. Why are they not there? 680 Mr Corlett: All I can say, again, is that we had to ensure in the feasibility that riders and teams will be prepared to participate in such a series, so we consulted extensively with them; and we had to be convinced that there were potential host cities that would beprepared to be host cities, and so, through the process, we had to consult with them. Those were the two 685 principal parties we felt we had to talk to, to see did we have even a potential chance for getting a series up and running. So those would have been the two key groups; those were the ones we focused on initially.
Q33. Mr Peake: And the names of the people who were employed by DED and were called 690 ‘experts’ earlier on, do those names appear on that list?
Mr Corlett: Some of our staff appear on there, but not all.
Q34. Mr Peake: And the people who are referred to as experts who are employed by DED, 695 how long have they been with the Department?
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Mr Corlett: I would have to go through and look at each individual officer, but many for many years.
700 Q35. Mr Peake: Bearing in mind the experts you thought would actually go with the winning bid, two or three names that you must have known would go with the winning bid as experts: are those names there, and how long have they been with the Department?
Mr Corlett: There is at least one individual, shall I say, who has been with us for a number of 705 years, who understands the TT intimately.
Q36. Mr Peake: Before this process started in 2010?
Mr Corlett: Yes, we were well aware of that, and our intent – 710 Q37. Mr Peake: Was that person influential in getting this whole thing to continue? You can see where the conflict arises.
Mr Corlett: I can. I would say not. I would say, in my judgement, no. I would say that the 715 principle for this was back looking at the private advice from the private sector, and in particular from The Sports Consultancy, who led the feasibility study and gathered views. That was saying there was a body of evidence saying that yes, a potential Series could work. I do not think any one individual in that could really materially change the outcome at any stage. I honestly do not believe so. There were just too many parties and we were all aware of 720 the interests of all the individuals, so I do not believe any one individual at any stage of this process could have materially altered the outcomes, no.
Q38. Mr Peake: Well, I put it to you that I was told over a year ago that this person actually did want this to happen. 725 Mr Corlett: I suspect some of the individuals will have their own view, some strongly for, some strongly against among the staff, and some maybe largely ambivalent. I think, for many of the team working on it, their first love is the TT. By the nature of it, as I said earlier, it is a very unique area ... For a government to be running something like a 730 motorsport event is very unusual, and so, for those staff, that is their interest – what they live and breathe during TT fortnight, what they are working 20 hours a day ... So their loyalty, I would suggest for many, first and foremost is to the TT that they love and commit so much of their time to. They are not normal civil servants, doing more administrative roles. So yes, they will have views. They are able to express their views, as have many other people, and we have to 735 make a combined judgement at the end of the day.
Q39. Mr Peake: So the process of the Department needs to be robust enough that individuals cannot then set the direction of policy for the Government.
740 The Minister: Absolutely not, and it could be conversely, really ... What you are saying is there will be those who probably wanted it to happen, and if they did, where we have arrived they will not be happy; and those who did want it to happen were probably quite happy, and that depends ... We have a team there. It is a fairly small team, I will say. Yes, there is expertise within that team. Could that be employed externally? Quite possibly, but it was not influential. 745 We had identified it. I will say this: in my time we had identified it early on and we ensured the process that we managed executively with the The Sports Consultancy ... we made sure that we kept everything external from potential named individuals. We were very conscious of that at a fairly early stage.
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Q40. The Chairman: Are employees who are getting into this situation required to declare 750 this?
Mr Corlett: What I would say is there is no need, because we know. We are well aware of who the staff are who would likely transfer. We know who those individuals are and we have kept them out of the procurement process entirely. We absolutely know their interests, and of 755 course while they remain civil servants their legal duties for confidentiality remain, and we have reminded them of their duties. So the individuals have to fulfil their obligations. To protect them and us from any potential concern, we have kept them totally separate from the process. Only a small number of senior managers, the Minister and the Members and the external advisers have been involved in the process. 760 The Minister: And do bear in mind we are going through a very similar exercise with the Villa and the Gaiety. We are at the final stages right now of reviewing tenders for externalising the operation of the Villa and the Gaiety. Again, there will be key members of staff there who will obviously have expertise, and of course through this process they had to be kept out of that 765 process, and we have been very conscious of that as well at the same time. So we are quite familiar with this particular role. I feel confident that if anyone, any individual member of staff, had any influence in terms of the final decision ... and it comes back to that meeting ... of all else came back to us ... a very robust meeting, about three and a half hours, if I remember rightly, with all the Departments, 770 with members of The Sports Consultancy, with Treasury Members in there, executive, and we made that decision unanimously as political Members.
Q41. The Chairman: I am reminded of Donald Rumsfeld’s quote: you don’t know what you don’t know. There are bits on either side of it, but ... 775 The Minister: Most people know everything on the Island, don’t you remember!
Mr Corlett: I suppose, from my previous career in the private sector and my time in Social Care, I have been in similar situations and am used to erecting similar Chinese walls to ensure 780 staff who are participants in what is a process that could affect them are removed from the decision-making process. So we are well aware of that, we are well experienced at handling this, and, as I said earlier, I think it is impossible to think that any one individual could have materially altered the outcome of this process. I simply do not see that as credible.
785 Q42. Mr Peake: My point is that they could actually start the process and influence the start of the process, and it is then the tail wagging the dog. Minister, what have you learned through this, and are you going to bring any changes of process in so this does not happen again? You just mentioned a similar process with the Gaiety: are you going to bring some changes in to make sure ...? 790 The Minister: I think the process is robust, to be quite frank. Again, I say this through certainly how the Department of Economic Development has operated it from my time as a Member and now as Minister. Once more, I believe we have made a decision that is in the best interest of the TT locally and 795 the local economy. I feel very strongly about that, and the proof will be in the pudding when we come back. We are very much focused on smaller smarter Government and the Scope of Government report, and we believe this should be externalised, the very same as what we have talked about ... I mentioned just earlier about the Villa and the Gaiety. But what I do know is that – and I would reiterate the point – the Enterprise Development Scheme ... Government and 800 politicians, executive, should not be in the process of actually making decisions about what is
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beneficial and not when it comes to business evaluations. If I was on the other side of the fence and I was in the private sector I might have made a different decision, but this is very different when it comes to Government. You are talking about the economy as a whole, rather than an individual business. 805 Q43. The Chairman: What do you think could make it be unshelved?
The Minister: Unshelved? I think proving that we can gain more in terms of the economic benefit here locally, and I think if you go back and think of what has actually happened ... 810 Remember the TV contract and the furore around that? Contentious at the time and it was a very difficult decision politically. However, it was proven to be very successful, and now you just say, ‘Well, how do you get it to the next stage?’ Any sort of change is difficult. I went out and I met with a lot of the traditionalists of the TT and I really got to understand their views about it and how it measures from that point of view, 815 from a traditionalist’s point of view, and the value that they put on it. But I do believe ... As I said earlier, I think if you see greater success financially and economically, and then look at a stage process of introducing a TT Series, it could be achieved and it could be five or possibly six locations around the world – equatorial, southern-hemisphere related – and I could see our Isle of Man plc having great potential benefit on the back of that. But what I want to see is more 820 evidence of the event being a greater economic success.
The Chairman: Gentlemen? Okay. I think that that ends our session on the TT Series. We will now go into private session to consider banking facilities available to commerce in the Isle of Man.
The Committee sat in private at 3.37 p.m.
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