Page last updated at 23:13 GMT, Monday, 21 April 2008 00:13 UK

Olympic cost plans 'unrealistic'

Tessa Jowell and an artist's impression of the 2012 Olympic stadium
Tessa Jowell says the Olympics will benefit all of the UK

The government was "entirely unrealistic" in estimating the cost of hosting the 2012 Olympics, a group of MPs have said.

The Public Accounts Committee said ministers used "wishful thinking" and "ignored foreseeable major factors" such as tax and security.

At the time of the bid, costs were estimated at just over 4bn, but last year the budget was put at 9.325bn.

The government says "a lot has changed" since the period the report focuses on.

In its report, the committee outlined the division of costs anticipated at the time of the bid - which were to be met by public sector funding of 3.4bn and a further 738m from the private sector.

'Legacy benefits'

But it pointed out the prediction for private money had fallen to 165m, leaving taxpayers and National Lottery funds to make up the difference.

Meanwhile a contingency sum of 2.747bn, not included in the original estimates, has been added to the Olympics budget, while tax liabilities have added a further 836m.

This report shows the figures for the original Olympic bid were at best a stab in the dark
Don Foster
Liberal Democrats

Policing and security costs have added a further 600m and the "delivery budget" has risen from 16m to 570m.

The committee said there had also been a lack of private sector competition to build the main venues - only one bidder has emerged for the main stadium, it said.

And it said people still do not know what they will get for their money or whether the 9.325bn budget would be maintained.

'Foreseeable factors'

It called on the Department for Culture, Media and Sport to finalise its "legacy benefits" planning and set out benefits for the UK as a whole - including how they will be achieved.

Committee chairman Edward Leigh said: "It is now clear that the estimated cost at the time of the bid, just over 4 billion, was entirely unrealistic.

75p of every 1 we are spending is for long-term regeneration
David Higgins
Olympic Delivery Authority

"It ignored foreseeable major factors such as contingency provision, tax obligations, and policing and wider security requirements.

"At the same time, the estimate of the extent to which the private sector would contribute funding towards the Games has proved little more than wishful thinking. "

He said the increase in public funding was "astonishing" and the "legacy benefits" had not been precisely detailed.

'Scathing indictment'

For the Liberal Democrats, Don Foster said: "This report shows the figures for the original Olympic bid were at best a stab in the dark.

"The fact that the government missed out so many foreseeable costs has further damaged confidence in its ability to manage budgets."

And shadow Olympics minister Hugh Robertson said the report was a "scathing indictment of the way the original Olympic budget was drawn up by [Olympics Minister] Tessa Jowell and [London mayor] Ken Livingstone and signed off by Gordon Brown as chancellor".

But Ms Jowell said the report had focused largely on the early stages of budget planning, adding: "A lot has changed since then and there is clear progress to report."

She said construction of the Olympic stadium was ahead of schedule and preparatory work had been done on time and on budget.

She said the "legacy" of the Games was still "central to everything we do" and organisers were working with the National Audit Office to ensure value for money and said the 9.3bn budget remained "unchanged and robust".

Olympic Delivery Authority chief executive David Higgins said he believed the budget was realistic and they could "deliver within it".

He added: "75p of every 1 we are spending is for long-term regeneration".

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