Govt warned over Olympic cost overruns
The government should have been more rigorous in setting the budget for the 2012 Olympic Games and must accept the burden of any new costs, MPs have warned.
A new report from the culture, media and sport select committee says it is “very disappointed” that cost estimates for the event are “seriously outdated” just 18 months after the bid was won in July 2005.
Culture secretary Tessa Jowell recently announced a £900 million increase in the budget, of which £400 million is to improve cost control in the project. More money may also be needed for a “programme contingency fund” in case of cost overruns.
But today the Labour-dominated committee says it is “ironic” that much of the extra money is required to ensure a contractor stays within its budget, and also questions why this – and the contingency fund – was not included in the original plans.
They question government proposals for the contingency fund, saying it should not be an “open cheque”, and also say it is “unsatisfactory” that the original London 2012 bid did not include the cost of VAT on the project, which is does now.
Ministers have suggested that London council taxpayers and the national lottery could up their contributions to bridge the funding gap, but the MPs say this would place “an unacceptable burden on both”.
The lottery is already contributing £1.5 billion to the Games, and today’s report says expanding this “would deprive existing good causes of even more resources and threaten severe delay or damage to existing programmes”.
Equally, while council tax precepts are already making up £625 million of the investment, this source “should also not be seen as a cash fountain” – particularly as the existing £20 increase on bills is not universally supported across the capital.
Instead, the MPs say the Treasury could cover the costs by forgoing its tax on tickets to the Games and encouraging more contributions from private firms and the London Development Agency, which are both likely to benefit from the regeneration of the area.
Shadow Olympics minister Hugh Robertson said today’s report confirmed the government had “incompetently managed the budget” for the London 2012 Olympics, and warned of “further bad news to come” on security costs and building cost inflation.
“The Olympics minister needs to bring forward an honest and transparent budget as a matter of urgency,” he said. This sentiment was echoed by the Liberal Democrats, who said parliament must have the opportunity to debate the issue.
However, a spokesman for the Department for Culture, Media and Sport (DCMS) said Ms Jowell was “absolutely committed” to transparency in the Olympic budget.
“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,” he said.
“Some costs have risen but that is principally because of the importance of ensuring a long-term legacy from 2012. We are confident that the benefits to this country from hosting the Games will far outweigh the costs.”
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