APPENDIX 1
Memorandum submitted by the Department
for Culture, Media and Sport
INTRODUCTION
1. The Government has to decide by the end of January
whether to support a bid by the British Olympic Association (BOA)
for the 2012 Olympic Games and Paralympics. The BOA would make
the bid but would not make a bid without the explicit support
of the Government.
2. The BOA are required to inform the International
Olympic Committee (IOC) of the name of the bidding city by July
2003. This means that the Government would have to inform the
BOA of its intentions shortly, so that the BOA can put together
a prospectus for the July deadline.
3. Full bids are required by the IOC by November
2004. The host city for the 2012 Olympic Games will be chosen
in July 2005.
4. The Government has been considering the case for
the Games since before January 2002, when the Arup consultancy
was commissioned to undertake a Cost Benefit Analysis on staging
the Games in London.
5. The experience of hosting the Commonwealth Games
has enabled us to focus on assessing and mitigating potential
liabilities. To come to a collective view by the end of this month,
Government has been concentrating on four key areas in our assessment.
They are:
— Affordability
(What is the cost of providing the facilities and infrastructure
necessary to stage the Games and would it represent good value
for money?)
— Deliverability (How
confident can we be that the proposals can be delivered effectively?)
— Legacy (Will the
games leave a legacy of facilities and other benefits which is
of long term value to the citizens of the United Kingdom?)
— Winnability (What
would we have to do to produce a credible bid, and what are the
chances of it succeeding?)
6. To supplement work on these criteria, we have
also undertaken work on two other areas:
- visits to and an assessment of the experience
of six cities in hosting or bidding for the Olympics; and
- an assessment of public opinion on bidding for
the Games.
FOUR
CRITERIA
Affordability
7. Clarity on costs will be needed. The Government
as funder of last resort will be the underwriter for the Games.
For example, significant cost overruns occurred in Montreal and
its citizens will be paying for the 1976 Games until 2006. Sydney
also experienced considerable increases in costs after the decision
to bid, as has Athens. In both cases, the costs approximately
doubled from the original estimates. Our own experience in hosting
the Commonwealth Games emphasised the importance of prudent budgeting
and the need for a considerable contingency.
8. Arup costed the Games at approximately £3.6
billion with revenues likely to be £2.5 billion leading to
a public subsidy of £1.1 billion (all figures are at outturn
prices). These figures represent a good baseline.
9. Arup's costs included figures for:
(b) New and upgraded
sports facilities including a new Olympic Stadium and pool
(c) Transports costs
for the Olympic Family (no major transport infrastructure costs
included)
(d) Elite sport development
programme
(f) Staging the Games,
including contingency
10. Work has been undertaken with the assistance
of PricewaterhouseCoopers and involving further discussions with
Arup, other stakeholders and those who would be involved in delivery.
Uncertainties around costs and revenue continue to be identified
and we expect this to be the case until plans are further developed.
We currently assess that there is an 80 per cent probability that
public subsidy will be in the range £1.1 billion to £2.1
billion. However until we are able to achieve greater certainty
we must allow for a higher potential public subsidy of around
£2.5 billion. There might always be exceptional circumstances
which could make it even higher.
11. We also need to consider the possible diversion
of funds from other schemes and projects to support the Olympics.
This is to be balanced against the benefits which the Olympics
may bring.
12. We have compared the costs with our best estimate
of costs for other Games. These are set out at Annex 1.
Deliverability
13. We would not bid for the Games without being
confident that we could stage them to good effect. This means
we must look closely at the available infrastructure. We must
be sure we know the right type of organisation to bid for and
then deliver the Games. And we must be sure that this organisation
has the right leadership.
14. One of the key elements of delivering the Games
effectively is transport. Transport arrangements based on the
existing plans for the infrastructure and involving traffic management
are being further assessed and costed where possible.
15. Work on the structure of the organisation required
for both the bid and staging is being undertaken. This will examine,
amongst other things, whether the organisation should be run centrally
by the Government, should be at arm's length from Government or
should be set up according to another model.
Legacy
16. One of the aims of the Games should be to leave
a positive impact, in sporting and economic terms.
17. The Secretary of State and the Minister of Sport
have visited a number of past and future Olympic cities to see
the legacy of the Olympic Games. Annex 3 sets out some findings
from the sporting perspective of these visits. The two key issues
emerging are the importance of a clear legacy strategy for facility
use after the Games, and that timely planning procedures are in
place.
18. There is a clear need to plan for the use of
facilities after the Games. Arup considered a new purposebuilt
Olympic stadium with a legacy as either an athletics stadium (seating
capacity 20,000 - 30,000) or as a football stadium (60,000). It
is unlikely that there enough large athletic events to make the
athletics option viable. Work is currently being undertaken to
assess whether a football club would be interested in occupying
this stadium as an anchor tenant.
19. Further work is also being undertaken on the
legacy for both élite and grassroots sport as a result
of the Games. Previous Games have shown that although the home
nation always performs well, this is not a lasting trend, and
that any increase in participation is not necessarily sustained.
20. Work is also being undertaken on the impact the
Games will have on the current Thames Gateway Regeneration plan
for the Stratford area, assessing whether the Games will help
or hinder this Plan.
21. An assessment of the economic impact for the
UK of staging the Games is also being done.
22. Details of the regeneration and economic legacy
of all the Games from 1972 to 2008 are included at Annex 4.
Winnability
23. Assessing whether we can win the bid is a vital
component of the review. The bidding process will be expensive
and so we must make a realistic assessment of the likelihood of
winning. This is as much a question of art as one of science.
We have been gathering information on the plans of other cities
and the attitudes of the IOC. A summary assessment is included
at Annex 2.
Opinion Poll
24. Support of all stakeholders and the public would
certainly help the bid. An ICM telephone opinion poll carried
out on behalf of the DCMS indicated that four out of 5 people
want the Government to bid, though this figure falls to 73 per
cent when the cost implications are included. There was general
support across the whole country. Six focus groups were also carried
out and their results show consistency with the opinion polls.
25. Overall the work we are currently finalising
will provide us with the information to make an informed decision
on whether the four key criteria are satisfied and whether the
Government should support a bid for the 2012 Games or not.
13 January 2002
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