Page last updated at 18:58 GMT, Wednesday, 14 November 2007

2012 chiefs face costs criticism

Olympic rings on fire
The initial estimate for staging the Games was 2.35bn

Olympic bosses have been accused of "grossly underestimating the entirely foreseeable costs" of the 2012 games.

MP Edward Leigh warned them they faced a "critical report" from his public accounts committee, after MPs on it criticised "misleading" figures.

The budget for the London games is 9.3bn - nearly four times the estimate that helped win the bid in 2005.

Jonathan Stephens, Culture Department permanent secretary, said the estimate had been based on the available facts.

Mr Leigh began the committee's two-hour grilling by suggesting 2012 chiefs had "deliberately put in low bid to get these Games and fool the people, knowing that the bid you put in at the time was totally unrealistic".

He suggested they knew about the extra costs likely to be incurred and "either acted in bad faith or were incompetent".

The Conservative MP told Mr Stephens: "Judging by your record so far I don't have any confidence in your ability to plan ahead.

It would have been a lot better if you had taken the British public into your confidence at the time
Edward Leigh, public accounts committee chairman

"I think what is going to happen in the run up to these Games in 2012 is you are going to start panicking, things will be half finished and you will start throwing money at it."

Mr Stephens replied that he was keen for the spending watchdog, the National Audit Office, to continue to review the work that had gone on since the Olympics budget was announced.

'Prudent'

The committee was told that much of the cost increase was down to an increase in the contingency fund of between 2.4bn and 2.7bn, to take into account any unforeseen costs.

Mr Leigh accused Mr Stephens and 2012 chiefs of deliberately inflating that figure to use as a "safety net so that you can come back to us in five years' time and say you have achieved your aim, we are within budget".

HOW 2012 ESTIMATES HAVE CHANGED
2003: Consultants Arup put total cost of building and staging the Games at 1.796bn
2003: Tessa Jowell launches bid in May telling MPs it will cost 2.375bn - including a 50% contingency
2005: Bid succeeds in July with "prudent" estimate of preparing for games of 2.4bn
2006: Tessa Jowell says Olympic Park costs up to 3.3bn
2007: Olympic Park budget now at 5.3bn - including regeneration and infrastructure
2007: Total budget, including contingency, security and tax, reaches 9.35bn

Mr Stephens said it was a "prudent but realistic" figure that took into account the "very considerable risks" involved in such a large project.

He went on to tell the committee he would expect most of the contingency fund to be used, although he insisted 9.3bn would remain the final bill.

And he repeatedly insisted the cost underestimate could not have been avoided.

He told MPs: "In the expert analysis that we commissioned and took into account in the run-up to the bid, we sought to anticipate the risks. We commissioned a risk assessment.

"I think it is fair to say there was not as full an appreciation before the bid, as was possible after the bid, of the size, scale and complexity of what was being delivered and the need for this scale of prudent but realistic contingency."

'Difficult' session

Other MPs on the committee lined up to attack the cost estimates during the two-hour session.

Labour MP Austin Mitchell said leaving VAT out of the bid calculations "does give the impression that the original costings were intended to deceive".

Mr Stephens said VAT was paid to the Exchequer, so it is "not additional cost to the taxpayer".

David Higgins, chief executive of the Olympic Delivery Authority, hit back at Mr Mitchell's claim there would be a massive increase in costs as the date of the Games approached.

"The biggest risk on the project is time. The biggest thing we can do to protect public money is gain as much possible time as we can at the start and be incredibly transparent about our timelines," Mr Higgins told MPs.

Summing up what he said had been a "difficult" session for Mr Stephens, Mr Leigh said: "I think you can expect a critical report from this committee. It seems to me that you, or rather your predecessor, grossly underestimated entirely foreseeable costs.

"And it would have been a lot better if you had taken the British public into your confidence at the time".


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