Olympic bid scuppered by 'cash for flights' fiasco

London's Olympic bid was dealt a shattering blow yesterday as it was forced to withdraw incentives after an investigation into claims it was trying to "buy" the Games.

The humiliating removal of the £15m package to lure the world's athletes to London comes just five days after its launch. That offer prompted an immediate probe by the International Olympic Committee's ethics commission. By yesterday it was clear it would be ruled to have broken bidding regulations. Lord Coe, a member of the IOC's original anti-corruption commission, took it off the table before it was censured.

Although the public message is that there is still everything to play for ahead of the IOC vote on 6 July, privately officials concede the affair could inflict deep damage.

Jacques Rogge, president of the IOC, has already registered his distaste at "a bidding war" between London, Paris, New York, Madrid and Moscow to hold the Games in seven years' time.

London's blatant offer shocked the Olympic movement, senior figures have told The Independent on Sunday. Gunilla Lindberg, an influential member of the IOC, expressed disapproval after it was first unveiled.

"This has not helped London's chances of hosting the Games," she said.

Another leading insider said: "We would have hoped that London would have had more class. This has lowered the tone. Surely this cannot have been Seb Coe's idea."

One other IOC source said London's offer recalled the days when "straight cash was handed over in brown envelopes".

Richard Caborn, the sports minister, conceded that the withdrawal was a setback. He said: "If mistakes have been made then that is unfortunate. The next thing is a public and proper, orderly withdrawal. We need to get back into the business of winning the bid."

But the recriminations over the bungled attempt to provide incentives to the world's athletes are likely to resound for weeks to come.

It is understood that Lord Coe was not directly involved in the construction of three packages unveiled in Berlin last week but was assured that they were within regulations.

The incentives included a £30,000 credit to all 200 national Olympic committees towards the cost of a UK training base, free full-fare flexible air tickets, train travel and £60 phone calls for all 10,500 athletes as well as free accommodation and expenses for delegates 12 months leading up to the Games.

Lord Coe was said by friends to be still confident that the offer would be ruled in order as late as Friday. By yesterday morning, however, it was clear that the ethics commission was taking a stern view. A spokesman for the bid said it was better to take the flak rather than adopt a "confrontational position" with the IOC.

Kate Hoey, a former sports minister, will welcome the withdrawal. She said: "I don't see why my constituents should be the ones to fork out for rich American kids to come here. Just think what that £15m would do for grass-roots sport."

The embarrassing withdrawal came the day after Cherie Blair unveiled "a countdown clock" in London's Trafalgar Square as the campaign entered its crucial last 75 days. "London's bid is really being taken seriously," Mrs Blair said - before the capital's rivals were handed a powerful weapon against it.

Speaking before yesterday's announcement, Tessa Jowell, Secretary of State for Culture, Media and Sport, said London's campaign had now gained important "momentum" as the race entered its last lap. "It is the bid that everybody is watching," she said.