How much will the Olympics really cost?

The cost of the Games remains a mystery

A leaked document seen by BBC London shows organisers of London's Olympic Games are worried about the time taken to reveal the true cost of staging the event.

Entitled 'Project GAB - a campaign to Get the Agenda Back' it says nothing else can get started without a budget being set and details concerns about the Games legacy to London as well as political interference.

The internal document, seen by BBC London's Inside Out programme, warns "we need to agree the budget/funding and announce it as soon as possible.

"Until this is done few other activities will get real traction."

A National Audit Office report on Friday is expected to criticise the government over its handling of the funding for the 2012 Games.

Freedom of Information

The overall budget for the London Olympics submitted in the bid to the International Olympic Committee was £2.4bn.

The figure came from a study carried out by construction company Arup in May 2002. It predicted the cost of the Games to be £1.8 billion.

The government then commissioned another report in 2004 carried out by accountants PriceWaterhouseCooper, who put the figure closer to £3.2bn. The government settled for a compromise figure of £2.4bn.

But the Arup report has never been made public, despite Freedom of Information requests to the Department of Culture, Media and Sport (DCMS).

Ms Jowell told MPs cost were up 40%

Dr Will Jennings, a specialist in risk management for major events like the Olympics, told Inside Out: "Given that we know that the Athens Olympics [in 2004] cost nearly £9bn, I'd have thought that that was quite a significant underestimate, and I think that people at that time would have thought that too."

He believes the final bill will be between £6-8bn pounds.

The programme claims it has received information that shortly after London won the Games, the government asked a high profile firm of accountants to take a look at the budget once more.

The programme said that very early on the government realised the £2.4 billion would not be enough and figures closer to £4bn were being talked about.

Since we put the bid in steel has only gone up by one or two per cent, albeit in a very volatile way, so it was rather surprising she used that example as a basis for why the cost had gone up Michael Ankers, chief executive of the Construction Products Association

In November, Culture Secretary Tessa Jowell told a committee of MPs costs had gone up by 40%.

Among the things she blamed for the rise was the doubling of steel prices.

But Inside Out spoke to Michael Ankers, chief executive of the Construction Products Association.

He said: "Since we put the bid in steel has only gone up by one or two per cent, albeit in a very volatile way, so it was rather surprising she used that example as a basis for why the cost had gone up."

Other costs have risen, such as security. The budget for that was set at £200m but it is almost certain to rise in the wake of the 7 July bombings in London in 2005.

VAT bill

There is also the question of VAT. It was not included in the bid budget, which came as a surprise to Tory MP Charles Hendry.

He asked Ruth Kelly, who was then a treasury minister, if VAT would be payable on Olympic buildings and was told it would be.

He tells the programme: "It's inconceivable that somebody in the DCMS, didn't pick this up and make ministers aware of it."

The VAT bill could be as much as £350m.

Professor Tony Travers from the London School of Economics told Inside Out: "I think deep within the Treasury they can have no idea what this will really finally cost."

He believes the true cost will be between £8-10 billion.

The DCMS refused to take part in the Inside Out programme and told BBC News Online it could not comment until the DCMS and the Treasury had decided on the Olympic budget.

The Inside Out Olympic Special is on BBC1 on Friday 2 February at 1930 GMT.