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Last Updated: Wednesday, 22 November 2006, 16:19 GMT
Q&A: Olympic costs
Staging an Olympics is a costly business. Staging the London games in 2012 seems to be getting costlier. What are the latest figures, and who will pay?

How much was it supposed to cost?

At the time London was chosen to host the 2012 Olympic Games, it was estimated it would cost nearly 2.4bn to build the infrastructure, while just over 1bn was earmarked for the wider regeneration project for the area post-2012. A further 2bn would be needed to stage the games themselves - although this money would be raised privately.

Have those figures changed?

Yes. Culture Secretary Tessa Jowell has told MPs the cost of the Olympic Park alone has gone up from nearly 2.4bn to 3.3bn - a rise of 900m, or about 40%. Some critics suggest the overall cost of building and running the games, and regenerating the Lower Lea Valley, might rocket past 8bn. The government has said it does not recognise that figure. The original budget is now being reviewed and is expected to be set next February. Ms Jowell did not give details of any parts of the budget other than those restricted to the Olympic park.

Why was last year's estimate so far out?

It sounds ironic, but nearly half the increase in budget - 400m - will go to employ a "delivery partner", CLM, to make sure the Olympics do not go over budget. Ms Jowell put the rest down to the increase in the price of steel and a recalculation of transport costs to take into account the effect of inflation between now and 2012.

A delivery partner? What's that?

Ms Jowell, who was not asked why the need for a "delivery partner" had not been included in initial costings, said CLM would have a vital role in making sure the "hundreds and hundreds" of contracts involved in staging an Olympics were brought in on time and on budget. Ms Jowell said having a delivery partner was the reason the Terminal Five project at Heathrow had been so successful.

What about other rising costs?

Security costs are likely to rise, organisers say, as a result of the 7 July London bombings, but these are still under discussion. Building costs were also estimated on the assumption London, like Sydney, would not have to pay VAT. But EU rules mean a bill estimated at 250m will be due, although Chancellor Gordon Brown has said the money might simply be transferred between departments.

Anything else we know is in the pipeline?

Mayor of London Ken Livingstone says "there is disagreement" with the government over the size of the contingency fund. The Treasury wants it to be 60% of the budget - Mr Livingstone wants 20%. This is still under discussion.

Who is going to pay for it all?

When the Olympic park bill stood at 2.375bn, London's council tax payers were expected to provide 625m, Lottery games to provide 1.5bn and the London Development Agency, whose funding comes from general taxation, 250m. The Lea Valley regeneration was also to be funded from general UK-wide taxation.

How much will London taxpayers have to pay?

The 625m contribution from London's taxpayer is to be met by adding 20 onto every Council tax bill every year for up to 12 years.

Who will pay the extra 900m?

It has not been decided who will have to foot the larger-than-expected bill. Ms Jowell has told MPs the existing "memorandum of understanding" signed by the government and the Mayor of London had been for overspends to be met by a mixture of London council taxpayers, and Lottery games, although it did not set out how much each side should pay. She did not comment on a report the Treasury might waive its 12p tax per lottery ticket sold. However she said discussions were continuing on a range of funding options. She said the end result must be "fair, sustainable and proportional".

What the about 2bn costs of staging the games?

The plan, at the moment, is that about a third of the costs of staging the Games will come from selling television rights around the world. The rest will be covered by corporate sponsorship and ticket sales. There are to be six major commercial partners, each paying up to 100m. Some money will also come from the International Olympic Committee.

That all sounds clear so far then...

Well it did until Ken Livingstone contradicted a host of Ms Jowell's claims. He told the BBC the 2.4bn figure for the Olympic Park had not gone up. He said the delivery agents would cost 250m and not 400m, and he said any other cost increases were attributable to new plans to put an extra 35,000 homes on the site. It was all like a type of mortgage he said, as these assets could be sold off to get the money back after the games.

Jowell to face Olympics grilling
21 Nov 06 |  UK Politics
Cost of Olympics to rise to 5bn
15 Nov 06 |  London
Brown downplays Olympic VAT bill
07 Nov 06 |  UK Politics

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