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Last Updated: Wednesday, 24 January 2007, 10:49 GMT
Lottery 'must not fund Olympics'
Computer generated image of London's proposed Olympic riverside park
The Olympic Games' cost has already risen sharply
Ministers should not rely on the National Lottery and London taxpayers to offset "faulty" cost estimates for staging the 2012 Olympics, MPs say.

They say they are "disturbed" that the projected cost of hosting the Games has risen 900m since the bid was made.

In a report, the culture, media and sport committee said it was surprised 400m extra was needed for a "delivery partner to exercise cost control".

The government said much of the cost was to ensure a good legacy for London.

'Not thought out'

The original bid had not included the costs of VAT, a "programme contingency" or inflation, the committee reported.

Costs were still rising and any extra should be met by the Treasury, not Londoners or the National Lottery, the MPs said.

Doubts about final costs must be resolved if public confidence in the project is to be maintained
John Whittingdale
Committee chairman

They voiced concern that a recent ban on advertising some food on television could mean a dip in sponsorship money.

"We can only conclude that cost-control procedures were not fully thought through at the time the bid was submitted," the report said.

"The committee is concerned about the distance between the figures submitted in the bid and the true costs, which will not become evident until after the Games."

'Unacceptable burden'

The committee's chairman, Conservative MP John Whittingdale, said grassroots sport would lose out if the Lottery had to contribute any more money.

He added: "We remain convinced that London can and will host a Games as good as any ever seen before.

"But doubts about final costs must be resolved if public confidence in the project is to be maintained."

In November, Culture Secretary Tessa Jowell said the cost of the Olympic Park had risen from 2.4bn to 3.3bn.

She said it was due to inflation and the decision to spend 400m on "delivery partner" CLM, which will aim to make sure the Games come in on budget and on time.

But the committee's report said the government's "apparent intention" that the extra money be met from the Lottery and London's council tax payers was "placing an unacceptable burden on both".

'Short space of time'

Instead the Treasury should help by foregoing the tax payable on Olympics proceeds, while the London Development Agency should pay more from profits from land sales, it said.

The report pointed out that Ms Jowell had said in October that rigorous attention was being paid to costs, but by November the extra 900m had been identified.

"The committee is disturbed that such statements have been disproved in such a relatively short space of time," said the report.

The original 1.5bn budget for staging the Games had not taken inflation into account, but this had not been "clearly stated" in the bid.

MPs said the rationale for a "programme contingency", not mentioned in the bid and which could reach 2bn, had to be "thoroughly explained".

VAT was not included in the original bid, apparently on the assumption that the Olympic Delivery Authority would be exempt, but has since been estimated at 250m or more.

MPs welcomed assurances that the taxpayer would not be liable but criticised the Treasury for not establishing the position from the start.

A Department for Culture, Media and Sport spokesman said: "We are applying rigorous financial controls to ensure that every pound we spend is well-spent.

"Some costs have risen, but that is principally because of the importance of ensuring a long-term legacy from 2012."

John Whittingdale MP on the Games funding row

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