2 Public funding for the
Games
13. The March 2007 budget provided for an extra £5.906
billion of public sector funding. The Exchequer will meet the
majority of the increase, with the revised funding package made
up as follows:[14]
Exchequer £5,975 million (increase
of £4,931 million)
National Lottery £2,175 million (increase
of £675 million)
Greater London Authority £925 million (increase
of £300 million)
London Development Agency £250 million (no
change)
Total £9,325
million (increase of £5,906 million)
14. The Government wants LOCOG, the organisation
responsible for the operational and staging aspects of the Games,
to be self-financing. LOCOG will not receive any funding from
the £9.325 billion funding package, with the exception of
a £66 million contribution towards the costs of the Paralympics.
LOCOG had estimated its costs at around £2 billion; its sources
of revenue included sponsorship, ticket sales and merchandising,
and it had secured three major sponsors. As required by the International
Olympic Committee, the Government is the ultimate guarantor of
funding for the Games and this guarantee includes meeting any
shortfall between the costs and revenues of LOCOG.[15]
15. While confident that the revised public sector
funding package of £9.325 billion would not be exceeded,
the Department had not produced a clear statement of what will
be delivered for the revised public sector funding, setting out
the time, cost and quality assumptions and the legacy benefits
expected.[16]
16. We asked for a summary of the commitments made
in the bid to host the Games and their costs. The Department subsequently
explained that the development of more specific plans since the
bid meant that it was not possible to reconcile current cost estimates
to the original, relatively broad, formulation of commitments.[17]
17. The Department is responsible for securing the
smooth flow of funds to the Olympic Delivery Authority so that
work is not delayed and suppliers can be paid. The plan was to
secure the £5,975 million Exchequer funding through the Government's
Spending Reviews, which would confirm the spending allocations
for individual departments. Some £4,028 million was secured
in this way. The Department confirmed that the spending review
commitments to date, which covered the period up to and including
2010-11, reflected the cash needs of the Olympic programme until
then, and that the next spending review would cover the period
beyond.[18]
18. As regards availability of other sources of funding,
£1,085 million of the lottery contribution was dependent
on legislation being passed. In addition, the £625 million
to be provided by the Greater London Authority from the Council
Tax precept was to be spread over the period up to and including
2016-17. The timing of the additional £300 million to be
provided by the Greater London Authority remained to be agreed.[19]
19. Clarity about when funds will be needed and whether
they will be available at the right time is key to making sure
the delivery programme is not delayed. The Comptroller and Auditor
General's report showed, however, that the Department was still
preparing a forecast of the timing of expected funding needs,
and that it was unclear how, when the Olympic Delivery Authority
required funding, the requirement would be shared amongst each
of the funders. The Department and the Olympic Delivery Authority
confirmed that they now had detailed cash flow analyses, with
monthly reporting to the Olympic Board.[20]
20. The final public sector contribution to the cost
of the Games will depend on the public sector share of proceeds
from the sale of assets after the Games. Land values in the Olympic
Park are expected to increase, and the Government has agreed with
the Mayor of London arrangements for sharing profits that may
arise from future land and property sales, although this agreement
is not legally binding. The Department estimated that £675
million would be available for repayment to the National Lottery,
which is the amount of the extra Lottery contribution set out
in the March 2007 budget. We calculate that to achieve this level
of repayment to the Lottery, total proceeds from disposal of land
and property owned by the London Development Agency would have
to reach £1.8 billion (compared to the costs of some £650
million to purchase the land in the first place).[21]
21. The deal with a private sector developer to build
the Olympic Village had not been finalised, but the Olympic Delivery
Authority confirmed that if there was surplus profit it would
be shared with the funders of the Games, including the National
Lottery. The Delivery Authority expected that the funders would
share the profits in ways that reflected each funder's contributions.[22]
14 C&AG's Report, para 37; Figures 7 and 8 Back
15
Qq 15; C&AG's Report, paras 22, 57-58; C&AG's previous
report, Session 2006-07, Preparations for the London 2012 Olympic
and Paralympic Games-Risk assessment and management, HC 252,
para 61 Back
16
Qq 11, 14; C&AG's Report, paras 5, 13; http://www.culture.gov.uk/NR/rdonlyres/39358A28-98B7-42C0-A2EE-6D78E78905F3/0/dcmsgoeannualreportjan08vs2update.pdf;
http://www.london2012.com/documents/oda-publications/programme-delivery-baseline-report.pdf Back
17
Q 79; Ev 19 Back
18
Qq 70-74; C&AG's Report, paras 69, 75-76; HM Treasury, 2007
Pre-Budget Report and Comprehensive Spending Review, Annex
D14 Back
19
C&AG's Report, para 70; Olympic Funding: Revised Memorandum
of Understanding between the Government and the Mayor of London,
June 2007 Back
20
Qq 16, 21, 27; C&AG's Report, para 77 Back
21
Qq 39, 159, C&AG's Report, para 73; Calculation based on Olympic
Funding: Revised Memorandum of Understanding between the Government
and the Mayor of London, June 2007 Back
22
C&AG's Report, para 53; Qq 33, 88-89 Back
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