PM backs London's Olympics bid but insists on greater funding guarantees

Tony Blair gave his backing in principle yesterday for London to bid for the 2012 Olympics, but only if stronger guarantees over funding can be secured.

After a lengthy discussion, the Cabinet agreed to defer a decision on whether to support a bid for at least two weeks.

The delay dismayed the British Olympic Association, but ministers expressed support for a bid, provided that clearer details of its financing can be agreed.

Tessa Jowell, the Culture, Media and Sport Secretary, told the Cabinet there was a strong sporting case for hosting the first Olympics in Britain since 1948. She also backed a provisional agreement between the Government and Ken Livingstone, the Mayor of London, to split the cost of underwriting the Games. However, Gordon Brown, the Chancellor, insisted that a memorandum of understanding be obtained from the Greater London Authority to ensure the funding was safe under future mayors.

Further work will also be undertaken on whether the national lottery will, as planned, be able to raise substantial sums towards the 2012 games.

The mood around the cabinet table was sympathetic to a bid, in the belief that three of the Government's four tests have been satisfied. These are whether London can win the nomination, stage the Games successfully and leave a positive legacy. The other test is whether they are affordable.

A cabinet minister told The Independent: "The only problem is finance. Many of us are concerned that we get it right."

Mr Livingstone said he had agreed to a government request for a written commitment on the financial deal for the cost of the Games.

The Chancellor's worries about funding have been echoed by John Prescott, the Deputy Prime Minister, and Alistair Darling, the Transport Secretary.