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Rising Olympic costs slammed as catastrophic

  • Entire £2.7bn contingency fund is to be used up
  • Final London 2012 bill will be three times bid figure

The most pessimistic estimates of the final bill for the London 2012 Olympics were vindicated yesterday when the most senior civil servant involved on the project admitted that the entire £2.7bn contingency fund for the project would probably be spent.

The admission to MPs by Jonathan Stephens, permanent secretary to the Department for Culture, Media and Sport, contradicts repeated assertions from government and the Olympic Delivery Authority that costs had not risen in real terms since the bid was submitted in 2004.

Until yesterday the ODA and DCMS had insisted that the intention was not to spend the contingency money but, at a hearing of the public accounts committee at Westminster yesterday, Stephens conceded that it might all be spent.

"The only safe assumption is to expect all of it to be spent," he said. "Obviously we are all working to ensure that less is spent but on a project of this size we might expect risks will materialise, and as they do contingency will be transferred to the ODA. We are trying to advance the timetable to deal with cost pressures but it is realistic to expect a significant amount, if not all, of the contingency to be spent."

The original budget, compiled in 2004, put construction costs at £2.375bn, with a further £1bn set aside for regeneration costs and another £700m coming from the private sector. In March this year the Olympics minister, Tessa Jowell, told parliament that the budget had risen to £9.3bn, an increase of more than £5bn, of which almost half was the "potential additional programme contingency".

Until now the Olympic officials have insisted that the new construction budget was broadly comparable to the 2004 figures once VAT and compound inflation to 2012 prices was taken into account. The likelihood that all contingency will be used explodes that argument.

Stephen's evidence came during an often heated appearance in front of the influential Commons committee, which was questioning Olympic officials for the first time since the revised budget was published.

Stephens and David Higgins, the ODA chief executive, came under sustained criticism for the disparity between the two budgets, with Edward Leigh, the Conservative chairman, telling them that he had little confidence in their ability to control costs as the Games approached.

From: Rising Olympic costs slammed as catastrophic, Paul Kelso,The Guardian, Nov 15, 2007

More at: Paul Kelso, Guardian

See Also: Public Accounts Committee

See also: Collusion or cock-up over bid costings ?

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