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A new Olympic cycle begins in September this year after the Closing Ceremony at the Beijing Games. Next time it will be London's turn. Work will already have begun on building venues; and, by the end of the year, a framework for legacy management of the Olympic Park will be nearing completion. The decisions which will shape the Games and their legacy will mostly have been taken and the project will move into a new phase.
We find much to commend in what has been achieved so far. There are signs that Games organisers are working to a realistic timetable and that they are making strenuous efforts to fulfil the vision set out in the bid. The LDA has completed the land assembly process—bringing the land forming the Olympic Park site under public sector control—within budget and without significant delay. On the financial side, LOCOG has already negotiated the majority of its top-tier domestic sponsorships before the Beijing Games have taken place. No previous Organising Committee has made comparable progress.
There is now a final figure for the budget for the Games: £9.325 billion, far higher than the estimated £3.4 billion at the time that the bid was submitted. Although it is not surprising that early assessments underestimated the final costs, such a radical revision of cost estimates has been damaging to confidence in the management of the overall programme. It has also exposed the Government and Games organisers to the charge that the initial bid was kept artificially low in order to win public support. However, we are reassured that the National Audit Office has concluded that the new budget represents a significant step forward in putting the Games on a sound financial footing. Difficult decisions on the budget for the Games have been taken, and these should now be supported. The priority now should be to keep costs down: the mark of success in financial management of the Games will be to have kept expenditure to a level comfortably below the £9.325 billion ceiling.
Although the figure for "programme contingency" for the Games is £2.747 billion, this excludes £973 million in contingency provision which has been built into individual project budgets. The true total for contingency is £3.72 billion, which includes £238 million for security contingency. The remainder—£3.482 billion—is available to the ODA and forms 62% of its base costs. Given the enormous size of this figure, we recommend that a substantial proportion of the programme contingency should be regarded as untouchable before 2011. Any unspent contingency to be funded from Lottery revenue should be returned for the benefit of non-Olympic Lottery distributors. We also recommend that the National Lottery Distribution Fund should be the primary beneficiary of any sums within Government departments' budgets earmarked for contingency but not spent.
The Government is banking on receipts from sales of land and property on the Olympic site and elsewhere after the Games to reimburse Lottery distributors for some of the income diverted and the London Development Agency for its costs. We have concerns about whether the confidence shown by the Mayor of London's Office and by the Minister for the Olympics that £1.8 billion or more will be raised from land sales is justified, given the downturn in the property market. We do, however, welcome the steps taken to ensure that Lottery distributors will gain the lion's share of receipts from land sales, once the London Development Agency has recovered its costs of acquiring land and paying compensation. The Memorandum of Understanding governing the share-out should, however, make clear that the amounts involved will be indexed for inflation. This will preserve the real value of the returns to the Lottery, as—under current plans—assets may take until 2030 to be realised.
Significant efforts have been made by LOCOG and the ODA to involve sports governing bodies and other interested parties in discussions on the design of main venues in the Olympic Park. With the exception of the governing body for shooting, they appear to have won support for their proposals. We regard it as highly regrettable that the site chosen for shooting events—the Royal Artillery Barracks at Woolwich—is not one which commands the support of any of the constituent bodies of British Shooting. More should have been done to explore alternative sites before the decision to select the Royal Artillery Barracks was taken.
The Aquatics Centre, at £303 million, will cost more than four times the forecast provided in the Candidature File submitted in 2004. The concept of the Aquatics Centre might be spectacular and eye-catching; but it appears to be over-designed and will be an expensive way of providing the facilities for water sports needed during and after the Games. We are also concerned that the ODA only managed to attract one firm bidder to construct the Centre. In our opinion, the history of the Aquatics Centre shows a risible approach to cost control and that the Games organisers seem to be willing to spend money like water.
We are uneasy that decisions are being taken on design and contracts are being let for construction before a legacy operator or owner has been confirmed. While the priority is to ensure that venues are built in good time for the Games, it must be recognised that the ODA runs the risk of building structures which need significant expenditure in post-Games conversion if they are to be attractive to future tenants or operators.
The London Development Agency is now leading work on a strategy for legacy use and management of the Olympic Park and the sporting, residential and commercial venues which will remain in the Park after the Games. Decisions on the intensity of development and the nature of housing on the Olympic Park site will have long-lasting consequences. The Mayor's Office acknowledged to us the importance of a sustainable legacy for the Olympic Park; that acknowledgement must be respected as the years pass and as the pressures to extract maximum value from sales of land and property increase. Conservative assumptions should be made on the commercial potential of sports venues after the Games, and the Government should remain open to the establishment of a trust, or similar vehicle, perhaps with funding pooled from the Exchequer, local authorities, the London Development Agency and others, to cover the revenue costs of sporting facilities in the Olympic Park after the Games have finished. Contracts to operate sporting facilities after the Games should specify that affordable access should be provided for local residents and for exclusive use by sports clubs.
There has been a great deal of talk about the Games' potential to build levels of participation in sport on a lasting basis. The profusion of commitments, promises and plans for using the potential of the Games to increase participation in sport being developed is bewildering. But, disappointingly, none of what is proposed amounts to a single, comprehensive, nationwide strategy. We are disheartened that the Department for Culture, Media and Sport has not acted upon the recommendation made in our previous report on preparations for the games, that it should publish a plan "as soon as possible" on how to achieve the maximum increase in UK participation at community and grass-roots level in all sport and across all groups.
Spin-offs from the 2012 Games alone cannot bring about the fundamental change in behavioural patterns needed to bring about an increase in participation in sport. The Games can, however, provide an opportunity to promote the image of health through sport and can generate a higher level of commitment of public sector funding and private sector sponsorship for sporting events and facilities. The Games will also provide a window during which the public is more receptive to efforts by Government and local authorities to increase participation. Much more can and should be done in schools, starting with the Host Boroughs, to encourage participation in sport and an immediate legacy for the Games.
UK Sport, the publicly-funded agency for elite sport, has set aspirations for performance by UK teams in both the Olympic and Paralympic Games at Beijing (eighth and second place respectively in the medals table) and in London (fourth and second place respectively). Britain's recent success in the World Track Cycling Championships notwithstanding, we may struggle to achieve these targets. We do not see a clear rationale for concluding that the performance by the UK Olympic team at Beijing (or indeed in London in 2012) is likely to outshine by any significant margin performance by the UK in recent Olympic Games. However, we strongly welcome the significant increase in funding which was awarded as a result of UK Sport's aspirations. On balance, we believe that the very ambitious aims for performance in the London 2012 Olympic Games will be good for British elite sport.
We are not confident that the aspiration of second place for the Paralympic team in London in 2012 "whilst aiming for the top spot" is well-judged. The strength of competition at Paralympic level is intensifying, but the structures which would allow the British Paralympic team to keep pace, by providing a clear pathway for the development of potential, appear not to be in place.
The Government intends that £100 million for elite sport should be raised from the private sector, yet it may be prove very difficult to raise, as no private sector sponsor will be able to cite any association with the London 2012 Games, in order to protect LOCOG's sponsors. The effect is to introduce an element of uncertainty into a long-term funding programme, hobbling financial planning. We believe that it will turn out to be a misjudgement and an unwelcome diversion of effort.
We are concerned that the decision by the British Olympic Association to set up an elite performance scheme which is separate to that run by UK Sport suggests a lack of faith in existing structures, despite the Programme's "complementary" label. We would feel able to be more supportive had the BOA worked together with UK Sport to improve existing performance programmes.
We welcome the discussions taking place to grant an exemption from the firearms legislation to allow talented pistol shooters to train in the UK under tightly controlled conditions, and we hope that this can be achieved as soon as possible.
We also call on the Department to make representations to the International Paralympic Committee to lift the ban on allowing athletes with a learning disability to compete in the Paralympic Games.
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