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Last Updated: Thursday, 15 March 2007, 18:07 GMT
Mihir Bose view
BBC sports editor Mihir Bose gets inside sport
By Mihir Bose
BBC sports news editor

News that the Olympic budget has risen to 9.35bn, as announced by Tessa Jowell on Thursday, 15 March, should have come as no surprise to users of the BBC Sport website.

Prime Minister Tony Blair listens as Culture Secretary Tessa Jowell speaks to youngsters at the Westway Sports Centre
Tessa Jowell announced the Olympic budget had risen to 9.35bn

It is almost exactly the figure I revealed three weeks ago.

What these figures confirm is how the Olympic costs debate has moved on in the government since that magical day in Singapore in July 2005 when London beat Paris to win the right to hold the 2012 Games.

To put it bluntly, while London's victory in Singapore owed a lot to Tony Blair and Lord Coe's bid team, few in Blair's government really expected to win.

In essence, ministers are having to come to terms with the cost of that victory.

They are now beginning to realise how much more money is required to make the most of this once-in-a-lifetime opportunity.

Think back to January 2003 when the government was deciding whether London should bid.

It required hard work by Tessa Jowell, Secretary of State for Culture, Media and Sport, to convince a sceptical Cabinet, in particular Gordon Brown.

The deal with the Mayor of London, Ken Livingstone, was finally done in Jowell's the DCMS office.

They agreed a budget of 2.375bn.

The figure was considered realistic but one that would not frighten the Cabinet or the nation.

Livingstone made much of the fact that London's council tax payers would be paying an extra 38p a week, less than the price of a Walnut Whip.

Police will be guarding against any terrorist threat to London 2012.
It is impossible to say what the security bill may be five years from now

However, what has curdled the cream that might go on top of the Walnut Whip has been one particular problem - the cost of converting that part of east London for the Games.

Livingstone wanted the Olympics there because, as he put it, that part of London had seen no investment since Victorian times.

However, as reports by consultants hired by the government have shown, that site is very difficult to build on because the land is contaminated.

It requires a lot of remedial work and that does not come cheap - Jowell's budget now says it will cost 1.7bn.

In some ways the most telling figure is the 2.7bn contingency.

I am told this figure was the subject of much fierce debate for months between the Treasury and Jowell's department.

I understand the Treasury was worried that government projects are often late and over budget, and the Olympics cannot be late.

But this need to hit a fixed deadline could well mean it is bound not to keep within budget.

The DCMS was worried that if you have a high contingency it is, as Jowell put it, "an advertisement for every single contractor".

Clearly the Treasury has won this argument.

The contingency has been set at around 60% of the cost of construction on the sites and the regeneration costs.

Jowell says only 500m of this will initially be given to the Olympic Development Authority.

But what are the odds that eventually the entire 2.7bn will be spent?

Some of the increase in the budget may be considered Treasury accounting.

VAT has to be paid but this is the government paying out with one hand and reclaiming the money with the other.

However, what is still not clear is why this was not anticipated when the bid was made.

Could the budget rise further?

The government is confident it will not, but that assumes that the security costs will not rise from the 600m budgeted.

When the bid was launched 213m was allocated for security.

The day after the Games were won came the London bombings of 7 July.

It is impossible to say what the security bill may be five years from now.

The National Lottery was always going to fund part of the cost, but Jowell's statement says it will provide a further 650m, making total lottery funding 2.2bn.

That is 20% of all lottery money.

The government may say this will not divert money from grass roots.

But there are many in sport who feel this is like robbing Peter to pay Paul and will not help achieve London's 2012 aim of converting couch potatoes into sportsmen and women.

They have a point.



SEE ALSO
London Olympics could cost 9bn
24 Feb 07 |  UK Politics
Mihir Bose view
23 Feb 07 |  Olympics 2012


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