Cost of staging Olympic Games could be twice original estimate

Planners of the 2012 London Olympics have admitted for the first time that the cost of staging the Games would be "significantly higher" than previous estimates.

The original architects of the London Games had claimed that £2.4bn from the public purse was a "robust" figure but that now looks certain to climb above £5bn.

An emergency debate at the Greater London Authority yesterday was prompted by the resignation of the project's engineer-in-chief, Jack Lemley, who went on to claim the Olympics were running behind schedule, were over budget and prone to political interference.

Sir Roy McNulty, the acting chairman of the Olympic Delivery Authority (ODA), responsible for the infrastructure of the Games, admitted: "There were issues between Jack and the ODA and other stakeholders. There was a mismatch that led to serious differences and it was in everybody's interests that he return to the US."

The previous official line said only that Mr Lemley left to attend to his engineering consultancy.

Further pressure on costs has come because the ODA is not exempt from VAT as previously thought. The Olympic bill will also increase due to increased security requirements and the widening scope of the regeneration of the Lower Lea Valley, the low-rent industrial site earmarked for the Olympic Park.

A Treasury review of a new Olympic's budget is expected to conclude by Christmas, and £5bn is seen as a conservative estimate.

The new budget will include a contingency fund of up to 60 per cent, desired by the Treasury. Building in such a large margin for error was labelled as "absolutely, breathtakingly ridiculous" by Ken Livingstone, the Mayor of London.

"If you start out on this huge infrastructure project and say it might overrun by 60 per cent, everybody bidding for contract knows you have set aside this huge pot of money for when they screw up," he said. "That sends all the wrong signals."

Mr Livingstone believes that a 60 per cent figure would encourage potential Games contractors to hike their prices for work in developing sites. Sources at the GLA say the 60 per cent figure is a Treasury shot across the bows to other government departments to budget for the Games. Mr Livingstone said he would reluctantly sanction 20 per cent to preserve "unanimity" on the Olympic Board.

He could offer no guaranteed council-tax cap: Londoners pay an average of 38p a week towards the Games. To plug any potential gap he raised the prospect of a windfall charge on property developers in the East End. The Mayor also called on the Government to waive a 12 per cent tax on sale of Olympic lottery scratch cards.

Policing the Games will cost £300m and securing the Olympic Park is bound to increase from the £190m estimated before the 7 July attacks. The bill was £1bn for the Athens Olympics.

In his parting shot, Mr Lemley also touched on concerns that the main Olympic stadium would be added to a long list of white elephants created by previous Olympics. He said an 80,000-seat stadium could not easily be converted into a 60,000-seat venue for a football club, such as West Ham United or Tottenham Hotspur, a plan backed by the Government.

David Higgins, chief executive of the ODA said it was now "highly unlikely" that such a club would meet the £150m cost of this and that the stadium would most likely become a 25,000-seater venue mainly for athletics after 2012.

Mr Higgins said it would be a "waste of public money" not to dovetail the plans for the Olympic project with a broader regeneration of the so-called Thames Gateway area.

He said: "It would be a significant waste of public money not to put in the utilities and infrastructure for the community that will have had to put up with six years of disruption."

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