Agreed funding of £2.6bn moves Olympic bid closer

A bid to stage the 2012 Olympic games in London moved a step closer yesterday when ministers secured a £2.6bn funding package with Ken Livingstone, the Mayor of London.

Lottery operators Camelot could rescue the bid by launching a new game specifically to raise up to £1.5bn towards the overall cost with the remainder coming from the London Development Agency and council tax-payers.

A prize draw, promoted by sports stars, would only go ahead if Camelot could give assurances to Culture secretary Tessa Jowell that other good causes would not lose out.

The deal raises the prospect of London council tax-payers facing a surcharge of up to £20 a year over seven years from 2006. But Mr Livingstone's officials said the figure was based on a "worst-case scenario". The agreement secures the basis for funding the Games but sources in the Culture Department insisted no decision had been taken on whether to bid for them. The package will be presented on Thursday to the Cabinet, which will decide whether to go ahead.

A spokesman for the Culture Department said: "There isn't a done deal yet. There is still a huge number of details to work through. We cannot put the cart before the horse."

Mr Livingstone said: "I'm delighted that we have been able to agree a robust financial package that will enable an Olympic bid to be made. It is a fair deal for London. Overall, we can expect £5bn in investment for a maximum contribution from London taxpayers of £550m. I now look forward to this proposal going to the Cabinet."

Meanwhile, the five times Olympic gold medallist Sir Steve Redgrave delivered 66 letters from international champions to 10 Downing Street to push the case for staging the Games in London.

He was joined by two members of his last gold medal- winning Olympic team, Matthew Pinsent and James Cracknell, and Jade Johnson, the Commonwealth Games long-jump champion.

Sir Steve said: "We've got a window of opportunity. Bringing the games to this country will be absolutely fantastic, not just for London, but the country and the whole benefit of British sport. More and more support is coming in."

"If we look at other games in recent history, they've either made a small loss, or broken even, or made a small profit, well, why can't we?"