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Last Updated: Tuesday, 23 January 2007, 06:32 GMT
MPs criticise London 2012 plans
By Mihir Bose
BBC sports editor

Britain celebrated London's successful bid in July 2005
Crowds celebrate London's victory in Trafalgar Square
A report by a group of MPs on the progress of the 2012 Olympics is critical of the government's handling of the project's finances.

With 2,012 days until the games start, the Select Committee on Culture Media and Sport is to issue on Wednesday a very critical report.

It raises questions about Olympic costs and who is going to pay for any financial overrun.

And the BBC understands the initial draft was even more hard hitting.

The price of a unanimous report from the all-party group was some watering down of the conclusions. Even in its published form, it will cause ministers some disquiet.

The MPs have three areas of great concern - rising costs; the Games' legacy; and the effect on grass-roots sport of diverting national lottery funds to the Olympics.

The decision on who should pay any cost overrun is a discussion for Government, not for the organising committee

London 2012 chairman Lord Coe
The report raises concerns about why costs have gone up by 40% in the 18 months since the bid was won.

With the Games still more than five years away, the MPs will ask how much further costs will rise.

MPs are well aware of the Wembley saga, and one source told me: "Unlike Wembley's completion, you cannot postpone the Olympics. It has to be held in the summer of 2012.

"But the government could be over a barrel in order to meet the immoveable timetable for the Games."

I am told the MPs are concerned that some of the costs that have arisen were not anticipated.

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For instance there is an additional 400m for a delivery partner. The delivery partner is meant to monitor costs, but the MPs want to know why this cost was not anticipated when the bid was made.

A source told me: "There is no doubt there has been sloppiness with costs.

"Take VAT. Before the bid, we were told no VAT was payable on Olympic construction. Now we are told VAT will have to be paid.

"What may happen is VAT will be paid and then the Treasury will find some way of refunding it. It was just not thought through."

The report will also raise questions about the legacy left by the 2012 Games.

Lord Coe
Coe's promise of an Olympic legacy is queried by the report
When the bid was approved in Singapore last year, London's bid leader Lord Coe said a London Games would leave a sporting legacy like no Olympics before.

However, MPs have looked at past Games and found no Olympics has created a permanent legacy.

They are also very unhappy that in order to fund the Games, money is being taken from the lottery, which means funds being diverted from grass-roots sport.

Brigid Simmonds, who chairs the Central Council for Physical Recreation, which represents 270 sports governing bodies, told the MPs her great fear is the Olympics will starve grass-roots sports and not convert couch potatoes.

She said: "The Lottery is not a ministerial piggy bank for the Government to raid whenever it sums are wrong. We must ensure that 2012 is not delivered at the cost of grass-roots sport."

The MPs are believed to have endorsed many of her concerns.

But London 2012 chairman Lord Coe told Five Live: "The decision on who should pay any cost overrun is a discussion for Government, not for the organising committee.

"We know exactly what our budget is. It is 2bn and we raise all our money from the private sector and that is the cost of staging the Games.

"I have not seen the MPs report but the discussion that is taking place is the far bigger picture about what you are going to do with East London and how you are going to make that legacy work, not just for the people of London, but for the people of the UK."

Another of the questions the report focuses on is who pays for the Games.

A computer generated image of how the 2012 Olympic Park will look
Stratford will be transformed by the Games - but at what cost?
At the moment it is mainly the Lottery and the London council tax payer.

The lottery will pay 1.5bn and London tax payers 625m. The only government money is coming via the London Development Authority and this amounts to 250m.

But some believe the Treasury should stump up the money if costs overrun.

There is a memorandum of understanding between the Treasury and the London Mayor that if they do, the Chancellor and Mayor will discuss how to meet the shortfall.

But MPs find this memo vague and feel it is not fair for London council tax payers who are already due to pay an extra 20 a year for the Games.

One source told me: "Is it fair if you live in Richmond and have to pay more for the Games when a few miles down the road in Surrey or Middlesex you do not?"

One suggestion is that extra funding should be provided by the London Development Agency, which will inherit the facilities in East London.

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