Summary
At the time of London's bid to host the Olympic and
Paralympic Games in 2012 the cost of the Games was estimated to
be just over £4 billion. The costs were to be met by public
sector funding of £3.4 billion, with a further £738
million from the private sector.
After London was awarded the Games, the Department
for Culture, Media and Sport and the Olympic Delivery Authority
reviewed the cost estimates and in March 2007 announced a budget
of £9.325 billion. The Department has stated that public
sector funding will not exceed this figure.
The March 2007 budget included contingency provision
of £2.747 billion. This sum was not included at the time
of the bid despite Treasury guidance that budgets for major projects
should allow for the tendency to underestimate costs. Since March
2007, £500 million of the programme contingency has been
allocated to the Olympic Delivery Authority to cope with early
financial pressures. Clarification over the delivery structures
for the Games means that the Olympic Delivery Authority incurs
tax liabilities in the normal way, and this has added a further
£836 million to the earlier cost estimates.
The March 2007 budget also included a preliminary
estimate of £600 million for policing and wider security,
over and above the cost of site security during construction.
No estimate for the cost of policing and wider security was included
at the time of the bid. In addition, the Olympic Delivery Authority's
programme delivery budget has risen to £570 million, compared
with an original estimate of just £16 million.
Whilst the cost estimates have increased by £5.3
billion, the public funding required to meet these costs has increased
by £5.9 billion due to significantly lower expectations for
private sector funding. Some £4.9 billion of this increase
is to be met by the Exchequer and £675 million by the National
Lottery, bringing the total Lottery contribution to £2.175
billion. The final cost to the public sector will depend on proceeds
arising from the disposal of assets after the Games, in particular,
the sale of land on the Olympic Park, as well as the share of
profits expected once the Village is converted into housing and
sold.
The estimate of £738 million private sector
funding towards the cost of venues and infrastructure at the time
of the bid was revised to £165 million (less than 2% of the
total funding) in the March budget. In addition, whilst the Olympic
Village had been expected to be fully funded by the private sector,
the March budget included a £175 million public sector contribution
to the Village. Private sector construction firms have a vital
role in delivering the Olympic programme, but the Olympic Delivery
Authority has had difficulty in achieving competition between
bidders for contracts to deliver the main venues, with only one
bidder emerging for the Main Stadium.
The prospect of longer term benefits from hosting
the Games was central to London's bid. The Government has set
out five high level legacy promises but more detailed plans have
not yet been finalised. It intended to publish a 'Legacy Action
Plan' early in 2008, and the Olympic Delivery Authority will be
working with the London Development Agency during 2008 to set
out arrangements for use of the Olympic Park after the Games.
On the basis of a report by the Comptroller and Auditor
General,[1] we examined
the Department for Culture, Media and Sport and the Olympic Delivery
Authority on the budget for the London 2012 Olympic and Paralympic
Games.
1 C&AG's Report, Session 2006-07, The budget
for the London 2012 Olympic and Paralympic Games, HC 612 Back
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