Conclusions and recommendations
1. We
note the confidence of the ODA and of the Secretary of State that
remediation costs will be contained within the existing budget.
However, given that the site survey work is little more than 50%
complete, uncertainty will remain. The authorities should be more
specific about the precise nature of contamination at the site,
and the Government should report back as soon as the survey is
completed. (Paragraph 15)
2. We note that there
remains a lack of clarity about the expenditure of such a significant
sum [£1.044 billion for linking the Olympic Park to local
infrastructure], and we recommend that the Government issue a
detailed breakdown of how the figure was reached and how it is
to be spent. (Paragraph 20)
3. We commend the
scrupulous approach by the Secretary of State in distinguishing
between costs which are integral to the Games and costs which
are not; but we nonetheless encourage her to look favourably on
co-ordinating the expenditure of ODA funds with local regeneration
funds where long-term benefit for the local community can be shown.
(Paragraph 26)
4. No details have
been supplied as to what measure of inflation has been used to
arrive at the figure of £2 billion for the LOCOG budget.
We encourage the Secretary of State to provide further details.
(Paragraph 29)
5. We recommend that
further work be done to determine the potential impact of the
ban [on television advertising of all foods high in fat, salt
and sugar] and whether it will have an effect on sponsorship for
the Games. (Paragraph 38)
6. We admire the confidence
of the LOCOG team in its capacity to secure the necessary revenue,
including sponsorship. It would be wrong, however, to ignore the
fact that amounts raised through sponsorship and licensing, as
well as from ticket sales, are hard to predict and may turn out
to be lower than foreseen in the Candidature File. (Paragraph
39)
7. We believe that
LOCOG and the Government should recognise the possibility that
[LOCOG] revenue may fall short of that forecast; and we believe
that they should give early consideration to the implications.
(Paragraph 39)
8. The optimism of
LOCOG that the effort to secure sponsorship for the 2012 Games
will not detract from sponsorship for community sport is welcome.
However, the Committee will keep this under review. (Paragraph
40)
9. We urge the Secretary
of State to publish the revised budget for security costs, as
soon as it has been agreed. (Paragraph 46)
10. The lack of any
reference in the Olympic Objectives to the Government having responsibility
for security at the Games appears to be an oversight which should
be rectified. (Paragraph 47)
11. We welcome the
assurances by the Government that the ODA's liability to pay VAT
on goods and services will have no impact on the taxpayer. (Paragraph
49)
12. The Committee
regards it as unsatisfactory that this issue [liability to VAT]
has emerged so late in the process and that it was not resolved
at the time of the preparation of the bid document. (Paragraph
50)
13. We are surprised
that the Treasury did not establish the position [on VAT] from
the start. The Chancellor now needs to provide an explanation
of how this arose, particularly given that VAT did not have to
be paid on the costs of the Athens Games. He also needs to provide
details of how this issue will be resolved as soon as possible,
in order to ensure that there is no adverse impact on the financing
of the Games. There may also be a requirement to agree any solution
with the European Commission, which could result in further delay.
(Paragraph 50)
14. The Committee
questions the rationale for allowing for programme contingency
on top of project contingency, especially at a percentage as high
as that proposed in Treasury guidance. We find it difficult to
see how a programme contingency of any substance, rather than
simply being prudent, does not run the risk in itself of escalating
the costs. We note that programme contingency was not included
in advice to those responsible for co-ordinating the bid but that
there is now an informed consensus that it should be included.
This new issue of additional 'programme contingency' gives the
impression, rightly or wrongly, that the initial advice upon which
DCMS relied appears to have been deficient; and we believe that
the Treasury could and should have drawn attention to this alleged
deficiency before the bid was submitted. Given the possible scale
of such a new provision, the rationale for 'programme contingency'
should be thoroughly explained, with practical reference to other
major building projects around the world, and the professional
advice to the Treasury and DCMS (including that of KPMG) to justify
this should be published for the benefit of public understanding.
(Paragraph 55)
15. We welcome the
determination to ensure proper delivery of the 2012 London Olympics.
However, we are surprised that, given the original assurances
about the rigour of the budgeting process, it is only now seen
to be necessary to include this additional element of control
and that it is such a significant cost. We can only conclude that
cost control procedures were not fully thought through at the
time that the bid was submitted. We call upon the Government to
provide a detailed explanation of how the figure of £400
million for the Delivery Partner was arrived at, including any
total cost of construction which has been used in arriving at
this fee. We further call for the main terms of the agreement
with the Delivery Partner to be made public. (Paragraph 58)
16. We welcome the
Secretary of State's readiness to provide as much information
as possible to the Committee. We recommend that, given recent
controversy about the cost of the Games, the Secretary of State's
report to Parliament on the conclusions of the cost review currently
under way is as comprehensive as possible and should be in the
form of an Oral Statement. (Paragraph 59)
17. The Committee
is disturbed that such statements [on costs] have been disproved
in such a relatively short space of time. It is particularly ironic
that part of the extra costs already identified will be incurred
in paying a delivery partner to exercise cost control. (Paragraph
60)
18. The Committee
is concerned about the distance between the figures submitted
in the bid and the true costs, which will not become evident until
after the Games. We believe that everyone involved should draw
lessons from this in terms of project appraisal, management and
communication at this relatively early stage so that there is
no repetition which would prejudice public support for the Games,
their success or their legacy. (Paragraph 61)
19. We stress the
value of external assessment in building public confidence that
money is being spent properly, and we particularly welcome the
involvement of the National Audit Office. (Paragraph 63)
20. The timing of
the competition currently under way to operate the National Lottery,
when the potential for disrupting an essential funding stream
is so great, is very unfortunate. Although we accept that a decision
has been taken, we believe that it would have been better to have
extended Camelot's licence beyond the Games. We recommend that
the Commission carefully considers risks of a change of operator
on preparations for the Olympics when reaching its decision. (Paragraph
70)
21. We conclude that
the substantial financial contribution by Sport England to the
2012 Games need not necessarily have a major effect on programmes
to enhance participation in sport at community level. However,
there is a clear risk, if we are not careful, that programmes
outside the capital may suffer because of the focus on London
and in particular in sports which are either not part of the Olympics
or which are not recognised as mainstream Olympic sports. (Paragraph
77)
22. We have no doubt
that the diversion of money from the NLDF to the OLDF arising
from transfers already announced will reduce Sport England's ability
to undertake non-Olympic-related activity to promote grassroots
sport across the country. This will clearly be exacerbated by
any further diversion to meet Olympic cost increases. (Paragraph
78)
23. DCMS should justify
the inclusion of sums already spent in preparation of elite athletes
for the Games in Athens and Beijing as part of the funding package
for the London Games. (Paragraph 79)
24. DCMS should explain
without delay how it plans to carry out the further transfer of
funds from the National Lottery Distribution Fund to the Olympic
Lottery Distribution Fund, so that the effect upon distributors
is made clear. (Paragraph 81)
25. A further transfer
of Lottery revenues from the National Lottery Distribution Fund
to the Olympic Lottery Distribution Fund, above the £410
million already identified, would penalise good causes yet further.
We believe that any further diversion of money from the Lottery
would reduce the money available for each of the good causes,
and it is not our preferred option for funding any overspend.
(Paragraph 83)
26. We recommend that
a cap should be placed on the liability of London residents to
fund any further increase in Games costs via increases in the
Council Tax. Beyond that, other means of raising revenue should
be used, and the need for further funding from the Exchequer should
not be ruled out. (Paragraph 85)
27. As already noted,
although the Memorandum of Understanding is generally interpreted
as specifying that contributions to meet any shortfall between
Olympic costs and revenues would come exclusively from the National
Lottery and from the Mayor of London, through London Council Tax,
the meaning is not totally clear. We do not, in any case, accept
the principle of such a restriction. (Paragraph 86)
28. We have not examined
in detail the case for abolishing or adjusting the tax regime
applicable to the Lottery; but we believe that such a move could
well be viewed by the general public as the fairest means of securing
further funding for the 2012 Games. We recommend that the Treasury
should explore options for amending the tax regime applicable
to the Lottery, whether on a temporary or a permanent basis, as
a means of ensuring the necessary flow of funds into the Olympic
Lottery Distribution Fund. (Paragraph 90)
29. We do not believe
that the London Development Agency (LDA) should be the ultimate
beneficiary from the sale of land acquired for the Olympic Games.
We recommend that the LDA should state how it plans to dispose
of land once the Games have finished and should make proposals
for distributing any net financial gains which it makes from the
land, whether notional or through sales. We believe that the best
use for such funds would be to meet any Games costs which are
outstanding. Given the regeneration and legacy benefits from the
Games, we also recommend that the Government assesses whether
the £250 million contribution, within the Public Sector Funding
Package, from the LDA is sufficient in the first place. (Paragraph
91)
30. We commend the
bid team for the enormous weight placed upon sporting and community
legacy: this was one of the great strengths of the bid and may
have been decisive in the award by the IOC in Singapore. It is
all the more important, therefore, that it should be delivered.
(Paragraph 92)
31. We are satisfied
that responsibility for delivering the regeneration legacy for
London rests clearly with the Mayor of London. However, the Mayor
must acknowledge that local authorities, as the bodies most aware
of local needs, are best placed to convey local opinion. (Paragraph
97)
32. The commitment
to retain an athletics facility at the Stadium once the Games
had finished may have been a deciding factor when the decision
on Host City was made in Singapore. (Paragraph 103)
33. We recommend that,
if no club comes forward in the near future with a viable proposal
to become "anchor tenant" in the Olympic Stadium once
the Games have concluded, an effort should nonetheless be made
to allow scope in the final design for use as a home ground for
a club with a significant and regular following. (Paragraph 104)
34. We note that discussions
are still under way between the Olympic Delivery Authority and
the Host Boroughs, and we strongly recommend that the design for
the Aquatics Centre should provide for a mix of leisure use and
traditional "lane" swimming. (Paragraph 107)
35. Understandably
the £134 million price attached to the Broadcast and Press
Centre has attracted some controversy. The authorities should
justify the cost. Again, too, its future value should be taken
into account, along with the other venues, when funding the rising
cost of the Olympics is being considered. (Paragraph 108)
36. We believe that
the decision to limit to five the number of permanent venues remaining
within the Park after the Games was sound. Any pressure from international
sporting federations - or indeed from the International Olympic
Committee - to build unnecessarily high-specification venues should
be strongly resisted. We are reasonably confident that a mixed
legacy use should provide a sustainable future for the Aquatics
Centre and the Olympic Stadium, although we believe that the latter
would be rather more secure if it were also to become the home
stadium for a football club, possibly in conjunction with a major
rugby club. The smaller permanent venues - for hockey/tennis and
for cycling - face a tougher struggle if they are to be commercially
successful, although we note the popularity of hockey at community
level and the tradition of excellence at cycling in the UK. We
are less certain about the future of the indoor sports arena,
which may face direct competition with established venues nearby.
(Paragraph 111)
37. No host country
has yet been able to demonstrate a direct benefit from the Olympic
Games in the form of a lasting increase in participation. While
we offer every encouragement to the Government and to other stakeholders
in achieving such an increase, we believe that lasting success
is most likely to be attained through an expansion of school sport
and through a greater priority being attached by local authorities
to developing community sport. (Paragraph 113)
38. We recommend that
DCMS and Sport England should publish a joint plan as soon as
possible on implementation of Olympic Sub-Objective 4.4, namely,
achieving the maximum increase in UK participation at community
and grass-roots level in all sport and across all groups. (Paragraph
113)
39. We further believe
that the 'legacy' of the Olympics should not start after 2012,
but rather right now. The UK's bid stressed local community participation,
yet the Olympics are to take place in some of London's poorest
boroughs where many of the inner city schools enjoy not so much
as a blade of grass. We recommend, therefore, that DCMS works
with the Department for Education and Skills, LOCOG and sponsors
to address the lack of sports facilities open to schoolchildren,
in particular, on whose doorstep the Olympics will be held. (Paragraph
113)
40. We agree that
fears of overcrowding, high prices and poor availability of accommodation
may well deter visitors from coming to London during the period
of the Games. (Paragraph 117)
41. To be successful,
London must have sufficient capacity, acceptable prices and good
quality accommodation to attract visitors during the period of
the Games. (Paragraph 117)
42. We very much welcome
the effort by DCMS to develop a tourism strategy for the 2012
Games. Although the consultation paper claims not to be designed
to inform a comprehensive tourism development strategy and to
concentrate merely on what will be needed to deliver improvements
by 2012, we note that the consultation invites views on possible
new targets to replace the existing ambition of a £1 billion
tourist industry by 2010. In doing so, it ranges well beyond the
Games and may presage a different approach to tourism by DCMS.
(Paragraph 121)
43. The Games will
advertise the UK and London in particular; they represent an opportunity
to raise profile and invest in future tourism rather than to generate
short-term gains. There may well be a need for more investment
in tourism by the Government if full advantage is to be taken
of that opportunity. (Paragraph 122)
44. We conclude that
training camps are unlikely to be of great economic benefit to
the nations and regions; and local authorities should be disabused
of any notion that vast sums of money are to be made from the
presence of national teams training in advance of the Games. We
believe, however, that where they are established the presence
of a training team will foster a sense of involvement in the Games
in the regions and will provide opportunities for cultural links
and for local schools to glimpse elite sport at first hand. The
principal benefits of hosting training teams will be through involving
the local community rather than generating economic gains. (Paragraph
130)
45. We conclude that
an ability to associate with the 2012 Games on a non-commercial
basis is essential if community involvement and legacy is to be
realised to its full potential. We recommend to the International
Olympic Committee that it should work with LOCOG to identify ways
of permitting this. (Paragraph 135)
46. The Cultural Olympiad
has received comparatively little attention so far. We recommend
that the Government should do more to publicise and co-ordinate
it, drawing together ideas, sharing good practice, and increasing
awareness of some of the more practical and imaginative suggestions
which are being made. (Paragraph 140)
47. We welcome the
Nations and Regions Group's recognition that local and community
interests must underlie national and regional strategies, and
we are encouraged by the Group's account of work under way. We
also endorse the concept articulated by the group that the Games
should be a UK Games hosted in London. We will in time, however,
seek further evidence that the working groups formed in each nation
and region truly reflect all elements of their communities in
their work. (Paragraph 145)
48. The Committee
notes the recent expressions of confidence by the International
Olympic Committee in the quality of work and planning and the
progress achieved in relation to timetable when compared with
previous host cities. We acknowledge the careful and thoughtful
approach taken so far and we endorse the decision by the ODA to
plan thoroughly before taking binding decisions. We strongly commend
LOCOG and the ODA for their achievements. (Paragraph 148)
49. It is inevitable,
as has been the case with previous Games, that the Games will,
quite simply, cost the UK significantly more than the outline
cost in the original bid. It is vital that public confidence
in the project is maintained. An authoritative figure for final
overall cost, and details of how it is to be funded, are essential
if this is to be achieved. (Paragraph 149)
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