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We will now set a budget for the ODA, the body established to manage the delivery of all the structural and regeneration elements of the games, and I can today confirm what the budget will be. The ODA will be given a budget to cover the construction costs as a whole of up to £5.3 billion up to 2012. That comprises £3.1 billion for building the Olympic park and venues—the core Olympic costs—£1.7 billion for Olympic infrastructure and regeneration linking the park to the rest of the lower Lea valley and a £500 million allowance for programme contingency, which represents 12 per cent. of the total programme contingency that has been allowed. I am placing a summary of the ODA 2007-08 business plan in the Library today as well as details of this investment.
Those costs, as in the 2004 bid, are net of tax. The ODA will pay tax, but the cost at around £840 million will be covered in full by the Government contribution. I can assure the House that the tax treatment of the ODA will have no impact on other funders. The Government have also decided that as the funder of last resort, it is prudent that a programme contingency should be held within Government under very tight conditions. This will be drawn on should the need be demonstrated, so as to ensure that the timetable is met and that quality is maintained. The level of contingency is £2.7 billion, of which, as I have said, £500 million will form part of the base budget of the ODA. Within that overall budget, we have also allocated a figure of £600 million for wider security, which is on top of the ODA budget for site security. This £600 million figure has fluctuated as assessments have changed and will obviously be subject to continued oversight and scrutiny in the coming months and years by the relevant Cabinet Committee, the Home Secretary and the Metropolitan police.
Lastly, as we announced at the time of the bid, around £390 million will be invested in non-ODA provision, including in sport—for example, community coaches—and in the Paralympics. That figure was included in the public sector funding package, but it is not part of the ODA budget.
Let me turn now to how the budget will be funded. At the time of our Olympic bid, the lottery and the London contribution was estimated at £2.4 billion, and as I told the House on 2 February 2006, the Government will contribute a further £1 billion as part of our commitment to Olympic regeneration.
I can announce today that central Government provision will be £6 billion. This comprises the £1 billion already committed for Olympic regeneration, the funding of the tax bill, broader regeneration, infrastructure within the park, wider security and programme contingency. Without any further increase for London council tax payers beyond that already committed, or any increase in transport fares to fund the Olympics, the Mayor will over the lifetime of the Olympic programme be making a further £300 million available to help meet Olympic costs.
The lottery will make a further contribution of £675 million. This will mean a total contribution of £2.2 billion from the lottery, which is 20 per cent. of lottery income for good causes from 2005, when the Olympic lottery started, to 2012-13. In addition to the £410 million already
confirmed, which will be shared according to the normal lottery shares, I propose to transfer after 2009 £425 million from the Big Lottery Fund and £250 million from the other good causes. No transfer will be made from UK Sport, which is responsible for preparing our sportsmen and women for the Beijing Olympics and the London Olympics in 2012. The decision to take a further share from the lottery has been taken only after very careful consideration, and implementation will take place only after full consultation about the implications with the lottery distributors and the other stakeholders.
The original memorandum of understanding made it clear that should we win the games, we would call on the lottery to help fund them. I believe that that principle is widely accepted. However, I am determined to ensure that this temporary diversion from the existing good causes to the Olympic good cause is done with the least possible disruption. I will continue to consult the lottery distributors about how best this can be done, but I assure the House that it is the Government’s intention that no existing lottery projects need be affected. We have also agreed with the Big Lottery Fund that resources for the voluntary sector will be protected and will, as it expects, continue to receive the £2 billion from the Big Lottery Fund between now and 2012. The decision on the lottery will be subject to an affirmative resolution in both Houses in due course.
London 2012 will bring financial gain to London and, indeed, across the country. For example, land values in the Olympic park are expected to increase considerably as a result of the investment that we are making. In my view, it is only fair that the lottery good causes, having contributed to the Olympics, should share in any such windfall. The Mayor of London and I have agreed that we will rewrite our memorandum of understanding and put in place profit-sharing arrangements to enable the lottery and future regeneration needs of the local area to benefit from the returns on the investment that we are making in the Olympic park.
As I told the Culture, Media and Sport Committee, the NAO has agreed to work closely with us in scrutinising the budget from now on, and the team overseeing the project in the ODA has a world-class reputation. This makes generous funding provision for the project as a whole, of which £3.1 billion is the core Olympic cost, net of tax and contingency.
Only a fortnight ago, the International Olympic Committee said that it was “assured and impressed” by the work under way after its visit to London. The announcement that we make today means that it is full steam ahead for 2012. The London Olympics will change Britain for the better for ever. The fact of hosting the Olympic games is already changing lives and communities and building ambition. I commend that, and this statement, to the House.
Hugh Robertson (Faversham and Mid-Kent) (Con): I start by thanking the Secretary of State for her statement and for honouring her commitment to warn us last night that it was coming. Let me also place on the record my party’s congratulations to the organising committee, which announced Lloyds TSB as its first top sponsor yesterday.
I only saw the statement 20 minutes ago, but three indisputable facts stand out. First, if one adds together all the separate parts, the budget for which the Government are responsible has nearly trebled since the London Olympics Bill left Parliament under a year ago— [Interruption.]
Mr. Speaker: Order. Members should let the hon. Gentleman ask his questions, whether they agree with them or not.
Hugh Robertson: Secondly, as a consequence, in raiding the lottery for a further £675 million to make up the shortfall, the Government will penalise precisely the clubs and small organisations throughout the country that were supposed to benefit from the Olympics.
Thirdly, as the Secretary of State has given us only the main column headings, we do not yet have the full, open and transparent budget that was necessary to restore confidence in the financing of London 2012.
As time is short, I should like to ask the Secretary of State five questions. The first concerns disclosure. As a result of information obtained under the Freedom of Information Act 2000, we now know that KPMG identified serious risks to the Olympic budget as early as October 2005, yet a month later the Secretary of State was still assuring the House:
“we believe that our budget is sound.”—[ Official Report, 21 November 2005; Vol. 439, c. 1224.]
The Minister for Sport assured the House—Members will enjoy this—
“I shall never forget the person who said, ‘Do not underestimate the budget. If you have to go higher, it will be seen as a failure so make sure your calculations are realistic.’”—[ Official Report, 21 July 2005; Vol. 436, c. 1505.]
The Bill did not leave Parliament until March 2006—a clear six months after KPMG had first raised concerns. My first question for the Secretary of State is therefore this: when were she and the Treasury first aware of concerns that the original budget was not deliverable, and why did not she share those concerns with Parliament?
Secondly, on contingency, the requirement to add whole project contingency to the individual project contingency already built into the bid has added, as the Secretary of State told us, £2.7 billion to the Olympic budget. Why did the Treasury and the Chancellor fail to identify that cost when they signed off the original budget?
Thirdly, on tax, given that we lifted our structures directly from Sydney, where no VAT was payable, and that VAT was not payable for the Manchester Commonwealth games, why did the Treasury and the Chancellor sign off the bid budget, without VAT, before adding, as the Secretary of State announced, a further £840 million to the budget? Can she assure the House that this is, indeed, simply a case of transferring balances and that no tax money will actually be collected?
Fourthly, on the private sector contribution, the NAO report highlighted the fact that £738 million was to come from the private sector in order to reduce the need for public funds—and is, presumably, still part of the new budget announced today. The Department for
Culture, Media and Sport has so far refused to answer any parliamentary written questions on this issue, always merely saying that it will let me have a reply in due course. Can the Secretary of State therefore explain to the House how that figure was reached, and will she confirm that it is still robust? If it is not, further public money will clearly be required to fill that additional shortfall.
Finally, on the lottery, the Secretary of State has announced that she will raid the national lottery for a further £675 million to pay for the Olympics. Despite the fact that
“enabling young people through sport”
was one of the key elements of the bid, the element of funding for sport that comes through the lottery has now been cut from the 25 per cent. that was originally proposed when the lottery was set up to about half under today’s proposals—a point consistently made by the Central Council of Physical Recreation. Can she confirm exactly what percentage sport—and, indeed, heritage, the arts and the Big Lottery Fund—will get under these new proposals, and, crucially, what assessment she has made of the financial impact of this in each and every constituency throughout the country?
Many Members in this House supported the Olympics and support them still. My party is among them. However, this statement confirms that the cost has almost trebled in the year since the Bill left Parliament and that the lottery will bear an extra £675 million shortfall. One of the key drivers for that is that the Treasury and the Chancellor signed off the original budget but failed to allow for VAT, at £840 million, or for contingency, at £2.7 billion, which they have now added to the bill.
The key thing now is for the Government to put a full, open and transparent budget in the public domain so that everybody knows who is paying for what, and when, and then to stick to it. That will do more than anything else to restore public confidence in the London 2012 Olympics. If they do not do that, I fear that the Secretary of State, or her successor, will be standing in front of us a year from now to admit that costs have risen further.
Tessa Jowell: The hon. Gentleman must work harder to persuade not only the House but the country that the Opposition are behind the Olympics instead of taking every opportunity to undermine the excellent work that is being undertaken not only in London but throughout the country to support the games.
Let me deal with the specific questions. As I took care to set out in my statement, I have referred at every stage—before and after we won the bid—to the cost review that is under way. The hon. Gentleman must understand the scale and complexity of reviewing not only the time scales but the contractual expectations and other management aspects of every single project. That is why we have a world-class delivery partner, which has undertaken that work for us. Similarly, I signalled that the cost review, which was begun almost immediately after we won the bid, would be necessary before we became the host city.
On the prudence of a programme contingency, VAT and other provision that the Government are making, I hope that the hon. Gentleman understands the clear
distinction between the budget for the ODA, which I set out today—the money we expect it to spend—and the funding provision to safeguard the project against any as yet unforeseen risks. That is a clear distinction.
There is a specific reason for Manchester’s exemption from VAT. The Commonwealth games operated on a host city basis and local authorities are exempt from paying VAT.
We have now allowed for private sector contribution in the budget, but on a pessimistic basis against the full expectation of what might be raised from that sector. Negotiations are under way all the time with different private sector partners, so it is possible, but not certain, that that may change. If the hon. Gentleman wants to know about private sector investment in the Olympic park, I refer him to the confidence that Westfield has shown in investing in the largest retail park at Stratford city and residential development because of the Olympic games.
Let me deal with the point about raiding the lottery. Such criticism is hard to take from an Opposition who made a manifesto commitment to wind up the Big Lottery Fund, which they are now defending, and conduct some sort of moral audit of grants that it made. Nothing has done more to galvanise sport and ambition among young people in this country than the prospect of London hosting the Olympic games. We are guardians of that ambition. Despite the knocks from the Opposition, we shall continue to be so.
Mr. Don Foster (Bath) (LD): We remain delighted that London won the right to host the 2012 games. The involvement of Lloyds TSB is clearly great news. Properly managed, the 2012 games will bring huge and lasting benefits to all parts of the country. Sadly, today’s statement and the chaos that has surrounded the past 12 months and more calls into question the Government’s ability to provide that proper management. Why has it taken so long to resolve some of the most basic issues?
Was not the Select Committee right to express surprise that the VAT position was not established from the start? Why has it taken so long to resolve the overall contingency? Were not the Treasury Green Book requirements known all along? How will the Secretary of State square the contingency figure with the comments of the Mayor of London? When asked about a contingency of 60 per cent., he said:
“There are no circumstances on earth under which I will agree... to a contingency of that size.”
What confidence can anyone have when the management costs of building the Olympic structure have leaped from approximately £16 million to nearly £400 million? Surely the Select Committee was right to say that cost control procedures were not fully thought through when the bid was submitted.
How can the Secretary of State have miscalculated by nearly £700 million the contribution from the private sector towards the building costs? How are the public to react when different members of the Olympic board, which is meant to be in charge of the enterprise, say different things? For example, when, in November last year, the Secretary of State told the Select Committee that costs had risen by £900 million, why
did the Mayor—another member of the board—say that the original figure was still the right one?
In the Secretary of State’s statement to the Select Committee that referred to £900 million, she also said,
“let me be absolutely specific about that: we are not talking about regeneration; we are only talking about the Olympic Park”.
A day later, the Mayor stated:
“The big extra costs we’re talking about are not to do with the Olympic games; they’re to do with what we do with the land around afterwards.”
The Chancellor must rue the day when he said:
“Britain works best when Britain works together and there is no better example than our preparations for the Olympic games.”
Far from working together, the past 12 months have been characterised by chaos, confusion and in-fighting of epic proportions.
Now we have a new set of figures. The Secretary of State says that the Government are working closely with the National Audit Office. Will she confirm that the NAO has verified the new budget? Will she agree to present regular reports to Parliament for debate in Government time so that we have a regular opportunity to scrutinise the progress of the Olympics?
Will the Secretary of State reconsider her plans to make a further raid on national lottery good causes? Surely she realises that the benefits of hosting the 2012 games rely on legacy. A new hit on the lottery of the extent that she proposes represents a cut of £1 million to every constituency in the land. The very projects that would help secure lasting benefits in those constituencies are now under threat, as will be the good will that currently exists towards the games.
Today’s statement is a sad indictment of the Government’s ability to deliver the best ever games on time and, above all, on budget. The confusion, in-fighting and, above all, writing of blank cheques must end.
Tessa Jowell: That is a rant worthy of Victor Meldrew that does not take us any further on. If one believes everything that is written in the papers—the work of our dear friends the journalists who watch our work—rather than working through the solutions to difficult problems, I suppose one feels that one can justify such a rant. I have always invited the Opposition parties to be part of the plans to develop the games and to champion them and young people’s ambitions. Yet they default at every turn to a position of point scoring, party political advantage, allegation and slur. The Olympics will be legacy games. One can build temporary structures in any part of any city and host Olympic games. The games that we host will create a legacy in one of the poorest parts of our country. My Labour colleagues and I celebrate that as an expression of why we are in politics.
Kate Hoey (Vauxhall) (Lab): May I caution the Secretary of State not to treat every question that raises an important issue as meaning that people oppose the Olympic games?
Will she give a commitment that not one single grass-roots sports project in constituencies will be cut as a result of the move from lottery money at the grass-roots? What will happen if the public suddenly change their minds and stop buying or buy fewer lottery tickets?
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