Olympic costs ‘up by £900m’

The cost of the Olympic park in London has already risen by £900 million to £3.3 billion, the culture secretary has confirmed.

Tessa Jowell failed to give details of the final budget for the London 2012 games, saying it was currently under review and would be published shortly. However, she insisted they would be delivered on time and on budget.

The minister was giving evidence to the Commons’ culture, media and sport committee amid recent reports that the costs of the project could spiral to as much as £8 billion – much of it to be picked up by the taxpayer.

The games were dealt a major blow when Jack Lemley, who quit as head of the Olympic Delivery Authority (ODA) in October, said he resigned because the project was likely to go over budget and be subject to delay.

Today Ms Jowell rejected his analysis – she insisted he had raised none of these concerns while in his post as chairman – and told MPs: “The Olympic games will be delivered on time.”

The project was so far on course to meet its timetable of two years for planning, four years for construction and one year for test events, she said. Andwhen the new ODA funds were agreed, she stressed the venue and Olympic park plans would “come in on budget”.

The culture secretary confirmed that costs of the Olympic park had risen by 40 per cent since the bid was submitted to the International Olympic Committee (IOC) in November 2004, from £2.375 billion to £3.3 billion.

She said it would be paid for as part of an existing deal with the mayor of London – which could see the capital’s council tax payers, the national lottery or the local development agencies pick up the bill.

But according to the original Olympic bid plans, £625 million is already planned to come from council tax in London – the equivalent of an extra £20 a year for the next 25 years – and £1.15 billion from the lottery.

And Mike Tuffrey, leader of the Liberal Democrats on the London assembly, said he was “deeply concerned” about where this £900 million would come from, saying: “Londoners should categorically not pay a penny more.”

In addition, Ms Jowell acknowledged extra costs would be forthcoming, not least for security. After the London bombings, she said the original estimates were “inadequate”.

She also said the question of whether the project should be charged VAT – which could add millions to the final bill – had yet to be resolved by the Treasury. However, she said this was more an “administrative rather than a funding matter”.

Similar discussions were also taking place on how much money to set aside for potential delays, she said. In addition to the contingency fund built into the project cost, a sum worth between 20 and 60 per cent of the total budget may be allocated for disasters.

Despite all this, Ms Jowell stressed: “We are way ahead in our financial planning and budgeting for these games.”