Preparation for the London 2012 Olympic and Paralympic Games - Public Accounts Committee Contents


Appendix A—Letter from the Chair of the Public Accounts Committee to Jonathan Stephens, Permanent Secretary, Department for Culture, Media and Sport


PREPARATIONS FOR THE LONDON 2012 OLYMPIC AND PARALYMPIC GAMES (COMMITTEE'S 74TH REPORT)

I am writing about the Department's response to the Committee's report on the preparations for the London 2012 Games. The Committee expects complete and carefully considered responses to its reports, but we have a number of concerns about the way the Department has responded on this occasion.

First, I want to say again how concerned we are that following publication of our report you sent me a letter which immediately found its way into the national newspapers. Having taken the trouble to reply, we then find you being quoted in the media, challenging the Committee's report, before Parliament has received the courtesy of the formal Government response in the form of the Treasury Minute. This is no way to conduct public business.

On the position against the £9.3 billion public sector funding package

The Committee has found it incredibly difficult to elicit from the Department a clear explanation of the financial outlook, with the evidence you provided on December apparently contradicted by the evidence you later provided on 26 April, and the Treasury Minute scarcely clarifies the position. So that the Committee can be clear about the position, please provide:

  • a detailed explanation of the methods you used to arrive at a financial quantification of each assessed risk remaining; and
  • the extent to which the quantification of each risk from across the delivery organisations, such as the Olympic Delivery Authority and LOCOG, took account of the likelihood of those risks arising

On the full costs and income from delivering the Games and their legacy

The Treasury Minute states that 'the Olympic Programme is not and never has been £11 billion'. That is not what the Committee's report said and I made that clear in my letter of 14 March: we were careful to differentiate between the public sector funding package and the costs outside it. The costs associated with delivering the Games and the legacy are clearly of public interest, albeit the intention is to recoup some of the cost.

It is therefore disappointing that, in the interests of making things clear to Parliament and taxpayers, you do not intend to produce a single auditable account and I encourage you to rethink. You do say, however, that separate evaluations of the legacy impact will be published. It is important that any assessment of the benefits is set against the costs that contributed to the delivery of those benefits, as our predecessors recommended in their March 2008 report. In your reply we would like you to explain how you intend to account for and report the full costs of delivering the Games and the legacy against the benefits

On venue security costs

In response to the Committee's concerns about the increase in venue security costs the Treasury Minute states that it was not possible to produce "final or definitive" costings at the time. Again, that was not the Committee's point: what we said was that we did not accept that the costs could not have been "better" estimated earlier. The point is not academic because the G4S contract was let on the basis of the earlier estimates and has since had to be renegotiated.

The Treasury Minute sets out the Government's view that putting the additional requirements out to tender would not have resulted in savings. In addition, the Treasury Minute argues against a 'further' lessons learned exercise, but does not provide any insights to the lessons it has learned to date, and the NAO has seen no lessons learned paper. In your reply we would like you to set out:

  • what you think the Department and the Home Office could have been done better; and
  • the extent to which you think the cost would have been lower if there had been a better understanding of the total requirement when the original contract with G4S was let

The Treasury Minute asserts that uncertainty about the security requirement was a reason why high levels of contingency were built into the programme. Our understanding is that there was £238 million that could only be called upon if there were a significant change in circumstances such as an increase in the security threat to the Games, but that the rest of the original £2.7 billion of contingency was potentially available to the Olympic Delivery Authority. It is not clear to us, therefore, that uncertainty about the competition schedule and the operating plans for each venue were factors in setting the contingency at the outset. Please clarify the position in your response.

The Treasury Minute explained that the Home Secretary is responsible for delivering of a safe and secure Games. However, our recommendation asked for clarity about who is accountable for value for money for public expenditure on venue security. Please set this out in your response.

On sports participation

We note that the Government seems to be moving away from the idea that sports participation will increase on the back of the Games, and object strongly to the Department's assertion that that the Committee had no evidence on which to base a view about value for money from expenditure on sports participation. Our report sets out the original target of 1 million new people regularly participating in sport, and the fact that only an additional109,000 was achieved for a cost of £450 million. These simple facts raise serious questions about value for money and we note from the NAO report that the Department itself considered this situation to be unacceptable.

On accountability for delivery of the legacy

We note that the Department accepts our recommendation on clarifying who will be "accountable to Parliament" for delivering the legacy, but then goes on to say that it will set out publicly in July 2012 who is "responsible" for which elements and makes no reference to Parliament. We would be grateful for your assurance that the people who will be responsible for the legacy will also be accountable. If this is not the case, we would like you to set out who will be accountable.

The Treasury Minute is the means by which the Committee, on behalf of Parliament, receives assurance that the Government has considered the Committee's reports carefully and responded fully and accurately. The Committee is looking for constructive and earnest engagement. All in all, on this occasion the Department's response falls short. I would be grateful for your response to our concerns by 14th June. I am copying this letter to Dame Helen Ghosh and the Treasury Officer of Accounts.

Rt Hon Mrs Margaret Hodge MP

14 May 2012



 
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Prepared 19 July 2012