Page last updated at 17:36 GMT, Tuesday, 9 December 2008

Jowell admits to 2012 cash fears

Tessa Jowell
Tessa Jowell says the 2012 Olympics is still on budget

Efforts to raise private cash to build the 2012 Olympic village and broadcast centre could end in failure, Olympics minister Tessa Jowell has told MPs.

She said "intense" talks were still under way to find private partners but if they came to nothing the cash would have to come from contingency funds.

She insisted the projects were still on budget and using contingency money was not "any kind of failure".

She told the Commons culture committee the games budget was still on target.

The planned Olympic village has already been cut in size from 4,600 to 2,800 flats, following a fall in property prices, with plans for tower blocks scrapped in favour of more modest, low rise developments.

Plans to sell off the part of the village as expensive luxury apartments when the games have finished had to be modified, the committee was told, but the "athlete experience" would actually be better as a result.

Cheaper location

It was put to Ms Jowell that the estimated value of the property to be sold off had fallen by 1bn - she did not deny it but said that was not a figure which had "an official status".

Lend Lease, the Australian firm contracted to build the village is meanwhile reported to have asked for more time to raise the 1bn it needs to complete the project.

The government have already advanced 95m in contingency money to enable work on the project to continue and Ms Jowell told the committee that negotiations with Lend Lease continue, amid reports other developers are keen to take over.

I am not conceding that either of these will be wholly publicly funded projects and I want that to be absolutely crystal clear
Tessa Jowell
Olympics minister

There are also funding concerns about the International Broadcast Centre (IBC) and press centre, which was to be housed in a building which according to Ms Jowell will be "one and half times the size of Canary Wharf tower" in Hackney, East London, after the private developers Igloo who were due to part fund the project pulled out.

Plans to split media facilities between two sites, in Hackney and Stratford, to save cash are under discussion with an announcement expected soon, said Ms Jowell.

She said she was confident an alternative source of funding for the broadcast centre - as well as a proposed use for it when the games have finished - would be found before work on it begins next spring.

"We haven't given up. There is, at the moment, no private sector contribution on the table and that is a change since the contract was first signed, but the venue has to be built.

"This is not a good time to pursue private sector investment but, remember, there is a three and a half year build and development programme. Just because now isn't right, doesn't mean that in two, two and half year's time, conditions may not be better and more sympathetic to getting private sector investment."

'On budget'

Asked by culture committee chairman John Whittingdale if there was a possibility the economy would not improve in time and no private cash would be raised at all for the two projects, she said: "Of course there is a possibility but that doesn't mean that we will give up on the possibility that there is private sector or investment from another source beyond government."

She said talks on both IBC and Village were ongoing and the 2012 organisers were "fortunate we have substantial contingency".

She added: "I am not conceding that either of these will be wholly publicly funded projects and I want that to be absolutely crystal clear."

She also tried to reassure the committee that all of the 2.7bn contingency fund, which is set aside for unforeseen cost increases such as security, would not be spent on bailing out the two projects - and that it would not lead to an increase in the 9.3bn budget set by the government.

The contingency fund was added on to the original cost estimates that helped win the Olympic bid amid much controversy but experts say it was set deliberately high so that the headline budget figure would not have to rise.

In December last year, before the economic downturn, Ms Jowell said there were "grounds for optimism" that it would not all be spent - a line she has stuck to since.

"So far the budget is on time and within budget," she told MPs.

"Headroom is being created within the contingency because risks that were costed are risks which, at this stage, have not materialised."

Hotel 'rip-off'

She added: "At this stage, I would not revise down our expectation for final cost... the use of contingency should not be seen as any kind of failure. It is very often the means by which the trade-off between time and cost can be properly accomplished."

Ms Jowell also told the committee that businessman David Ross had quit the board of the 2012 organising committee and other Olympic roles, following his resignation as a director of Carphone Warehouse in a scandal over the use of his shares.

Meanwhile, London's hotels have been warned about "ripping off" foreign visitors during the 2012 Olympic games.

Games organisers told MPs there would not be compulsory fixed tariffs to prevent hotels profiteering from foreign visitors.

But Paul Deighton, chief executive of the London games organising committee, said hoteliers had a duty to prevent damage to London's international reputation.

He said the Visit London tourist authority may draw up a voluntary code of conduct to prevent abuses.

Ticket prices

He also said competition sessions at the London 2012 Olympics will be shorter than in Beijing Games to try to ensure fans can get hold of coveted tickets.

"We are going to shorten sessions. In Beijing they had five-hour beach volleyball sessions. It was a great event but we will shorten it so it increases the risk of not having the same person in that seat for the entire session."

Efforts are also to be made so that people who can be "identified" as sports fans can get tickets so there are less empty seats at the events and less activity by ticket touts, he said.

He also appeared to row back from a commitment made three years ago when London was bidding for the games that half of the tickets would be 20 or less, saying it was too early to set specific prices.

He could not confirm suggestions that the top price for tickets to some of the key events, such as the opening ceremony, might hit 500 to 1,000, as they had in Beijing, but stressed that most tickets would be affordable.

"At the opening ceremony the demand is very very high, so it will give us the opportunity to sell those tickets high and give us the opportunity to sell other tickets at a lower price."

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