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The success of London's bid to host the 2012 Olympic Games and Paralympic Games was the cause of national celebration. In particular, our victory over our nearest rivals provided a boost to national pride; but sooner or later, hard questions were bound to be asked. The vast majority still look forward to a successful Games but doubts have already emerged, both about the cost of staging the Games and about whether a lasting benefit can be achieved.
In many areas, significant progress has been made. The ODA is well advanced in preparations for construction and is ahead of the game in comparison to previous Host Cities. LOCOG's activities are still fairly small-scale, but good work has already been done by the Branding Group. The LOCOG Nations and Regions Group has also made a good start on identifying benefits across the country, and we applaud its concept of a UK Games hosted in London.
However, just 18 months after winning the bid, it is clear that many of the cost figures it contained are already seriously outdated. Despite the Government's assurances about the rigour with which its cost estimates had been reached, it was always likely that these would escalate over time. Nevertheless, we are concerned that costs have arisen which should have been identified at the time of the preparation of the bid.
In particular, the "programme contingency" - on top of the contingencies built into the various construction projects - could amount to an almost open cheque if set at the level proposed by the Treasury. We are not particularly surprised at the increase in costs, and it should not be forgotten that substantial savings are being made in certain areas. But we are very disappointed that the cost estimates have been found to be faulty so early in the process.
The announcement that £900 million of extra costs - of which up to £400 million is for cost control - had already been identified confirmed that further revenue will need to be found, and the "sharing arrangement" under the Memorandum of Understanding will come into play. We believe that the Government's apparent intention that any shortfall must be met exclusively from increased contributions from the National Lottery and the London Council Tax risks placing an unacceptable burden on both.
National Lottery distributors for the main "good causes" - arts, charities, heritage and sport - recognise the benefits to the UK which will flow from the Olympics and Paralympics, but they are already suffering a decrease in income because a significant part of Lottery funds are going towards financing the Games. A further call on the Lottery would deprive existing good causes of even more resources and threaten severe delay or damage to existing programmes. The London Council Tax precept should also not be seen as a cash fountain: the Government rightly stresses that the benefits should be felt across the UK, and Londoners should not be paying disproportionately.
If the financial pain of paying more for the Olympics is to be widely shared, it will require a contribution from the Treasury. One easy and obvious first step would be for the Government to forgo the duty payable on proceeds of the Olympic Games. Private enterprise can and should also pay a part. Public money is being used to transform the Olympic Park, a contaminated wasteland, into a cleansed zone ready for redevelopment and served by a new transport infrastructure. The resulting increase in land values should not simply be translated into a profit for the owners or developers. Here is an another obvious source of funding for outstanding Olympic costs. In this respect, too, the contribution of the London Development Agency should also be reviewed in the light of the benefits it stands to receive.
The success of the London 2012 bid has been widely attributed to its visionary emphasis on the Games' potential legacy of a lasting increase in participation in sport by all sectors of the community - especially children. This would certainly be a real prize; but there is no evidence that it has been achieved by any previous Host City. We believe that detailed planning needs to start now if London is to do better in this respect. To achieve it, planning must start now. It will also be made harder if another large slice of the general funds available to Sport England is siphoned off to the Olympics.
There is a welcome understanding that a clear legacy use needs to be identified for each permanent new venue. This is a higher priority than trying to match some of the top-of-the-range facilities built for other Games: any pressure to gold-plate beyond the necessary specifications should be resisted.
There will be an economic benefit to be gained from hosting the Games, but it may not be quite as large as people expect. No-one can be sure, at this stage, how much extra income will be generated from tourism, but the Games may well deter as many people as they attract. Any gains will be in the long term but will not be automatic. Whether those gains will depend on better funding or on better strategic management is something which we will address in a future inquiry into tourism.
There seems to be a widespread belief that large numbers of national teams will set up camp in various locations around the UK well before the Games and dynamise local economies. Some areas are putting a lot of energy (and money) into attracting such teams. We believe that such expectations are likely to go beyond reality: there will not be a huge influx, and many think that money would be better spent on developing plans to increase sports participation.
Eighteen months after the announcement of London's victory, reality has set in and the scale of the challenges has become clear. We remain convinced that London can and will host a Games as good as any ever seen before. However, in all of the areas we have identified, more needs to be done and quickly if we are to achieve all of the potential benefits for the UK.
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