Warning over 'disturbing' state of Olympic funds

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A withering report on the Government's handling of the finances of the 2012 Olympics is published by a group of MPstoday.

Funding arrangements for the Olympics are already at a "disturbing" variance from the original plans, according to the Select Committee of the Department for Culture, Media and Sport, which has produced its findings after taking soundings from key 2012 figures since the bid was won 18 months ago.

The report comes after Tessa Jowell, the Culture Secretary, revealed to the committee at the end of last year that the Olympics budget had already climbed by at least £900m to £3.3bn.

That disclosure has prompted a fierce debate - ahead of the Treasury's financial review of the Olympics due to be finalised next month - about who should plug the funding gap. The select committee weighed in yesterday by calling on the Treasury to make up the difference.

The committee has further demanded that 12 per cent tax taken by the Treasury on Olympic lottery tickets be diverted to the Games. Under current arrangements the National Lottery will contribute £1.5bn towards the cost of the Games and the committee has warned against any further raid on Lottery funds which would detract from other good causes.

The committee also called for a definitive cap on the 38p per week supplement paid by London council taxpayers who under current plans will contribute £625m towards the cost of the Games.

Instead the London Development Agency, which handles property deals for the London Mayor, Ken Livingstone, should increase its contribution, assuming as the committee does that it will profit from rising property prices in and around the Games site in Stratford, east London.

John Whittingdale, the Conservative committee chairman, said: "We remain convinced that London can and will host a Games as good as any ever seen before. But doubts about financial costs must be resolved if public confidence in the project is to be maintained. Costs are still rising, and the time has come for the Treasury and others to step in and share the burden of any increases."

The report, entitled 2012 Olympics: funding and legacy also criticises the Government for failing to spot during the bid that Olympics building works are subject to 17.5 per cent VAT, which could amount to at least an extra £250m which Whitehall has assured will not be met by the taxpayer.

The report also criticises plans to build into the budget a 60 per cent contingency fund, which it says is so large it will only encourage contractors to increase their charges.

"The rationale for contingency should be thoroughly explained, with reference to other major building projects around the world," the report said.

The committee called on Ms Jowell to explain why the Olympics consultants, CLM, were being paid £400m partly to control costs although the MPs have been assured all along that the budgets are rigorous. "The committee is disturbed that such statements have been disproved in such a relatively short space of time," says the report.

It applauded the "significant progress" made in preparing construction. But it warned that if London is to do better than previous host cities in improving grassroots sports participation "detailed planning needs to start now".

The timing of the report will have needled Games organisers who chose yesterday to trumpet the Games' environmental ambitions on "2012 day", which marks 2,012 days until the opening ceremony. Sebastian Coe, the chairman of the organising committee, led Tony Blair on a tour of the Olympic Park in Stratford and claimed that the London Olympics would be the "greenest Games ever".

The London organising committee will also be angered by the MPs' views on training camps for foreign teams in the build-up to the Games - each national Olympic committee is eligible for a £25,000 credit towards such facilities.

The report states: "There seems to be a widespread belief that large numbers of national teams will set up camp in various locations around the UK well before the Games and dynamise local economies. Some areas are putting a lot of energy (and money) into attracting such teams.

"We believe that such expectations are likely to go beyond reality: there will not be a huge influx, and many think that money would be better spent on developing plans to increase sports participation."

The Culture Department said in a statement: "This is the biggest public sector building project in Europe and, as you would expect, we are applying rigorous financial controls to ensure that every pound we spend is well spent. Some costs have risen but that is principally because of the importance of ensuring a long-term legacy from 2012."

Key projects for 2007

Athletes' Village

Debate rages over the about the shape of the athletes' village in Stratford. The compact plot dictates that the facility should be high rise - but athletes prefer chalets with air conditioning and few staircases to traipse up.

Olympic Stadium

The 80,000-seat stadium, the centrepiece of the Olympic Park, is due to be reduced to a 25,000-capacity athletics venue after 2012. But West Ham football club has designs on it as a possible new home, despite the team's current lowly position in the Premiership

Aquatic Centre

The tender is out to find a builder for the stingray-shaped aquatics centre, designed by the architect Zaha Hadid, who previously designed the Mind Zone at the Millennium Dome. Her initial plans were scaled down as 'too extravagant'.