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Our success to date has been built on partnership and I like to think that the whole 2012 project in all its enormity has been a coalition project before coalitions became so fashionable. We are now approaching two years to go before the Olympic and Paralympic Games begin in 2012, and there is growing interest and scrutiny of the Games' delivery plans. I welcome today's debate as an opportunity to give the House a progress report on the 2012 construction programme, for which the ODA is responsible.

I am pleased to tell the House that the ODA remains on time and within budget to deliver its construction programme, with more than 65 per cent of the venues and infrastructure for 2012 now complete. Personally, I remain hugely impressed by David Higgins, chief executive of the ODA, and his team. It is almost impossible not to underestimate the enormity of the task that they have undertaken. They have been utterly focused, resilient and effective since they began in 2006. As a board member, I have found it remarkable to come across so many impressive people, all working with the same commitment-whether they are engineers, the team working with local communities or logistics, or so many others. The enthusiasm is tangible.

Of course, it is the measure of their success that the media have got pretty bored. After all, where is the fun in on-time and on-budget? The continuing support of the public has been crucial in preventing the expected dip in decent and fair coverage. The detailed scrutiny in Parliament has also been a vital part of this. That is not to say that it is all done and dusted. We are 65 per cent there, but some of the most difficult parts of the construction remain. However, it is going well. It is important to remember that our target date for completion for the majority of the programme is the summer of 2011 in order that venues can be handed over for testing.

In the six months since 2012 was last debated in this House there has been significant change in the park. For example, the 14 lighting towers on the Olympic

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stadium have been lifted into place. The roof is going on and seats will shortly be installed. The three swimming pools in the aquatics centre have been completed and tested.

Construction is well under way across the Olympic village site, including the academy, the new world-class education campus being built within the village. The transformation from a brownfield site to a new park in London is under way, with planting starting next week in the north of the park. The work on the Olympic park is more than just another construction project; it is something that encapsulates the very best of the UK. I take this opportunity to talk briefly about one specific venue, the velopark, which epitomises that. It contains the five characteristics which are integral to and which are reflected across the whole park: notably, the commitment to regeneration and legacy; excellence in design; sustainability; accessibility; and engineering and project delivery.

The site of the velopark in the north of the Olympic site has a historic relationship with cycling. It was the home of the Eastway Cycle Circuit, a course formerly used by Olympians such as Bradley Wiggins, and now relocated to another part of east London. It was also the most contaminated part of the site as it had been a post-war tip. The 6,000-seat velodrome will host the Olympic and Paralympic indoor track cycling events in 2012, alongside the BMX circuit. After the Games, these facilities will be joined by a road-cycle circuit and a 7.5-kilometre mountain-bike course. Furthermore, you will be able to hire a cycle and bike around the park, so it will be accessible to everyone.

The legacy velopark will be unique worldwide in combining all cycling disciplines in one cycling hub, and its legacy has been developed in consultation with the cycling governing bodies and the community users. The 2012 velodrome has a perfect success model to follow in Manchester, which has become the busiest velodrome in the world, with an oversubscribed track programme, producing 40,000 rides per year for all riders-novice to elite, from 9 to 79 years old. Following the success in Beijing, cycling is one of the fastest growth sports in the UK. With a legacy operator secured-the Lea Valley Regional Park Authority-the facilities will be available for both elite and community use for generations to come.

The design team for the velopark was chosen following a lengthy competition. The shortlisted teams were assessed by a jury which featured leading names from the design world and Olympic champion Chris Hoy. This ensured that the track was designed around the needs of the athletes. Design, innovation, and creativity lie at the heart of this project and the innovative design of the velodrome has challenged the notion that velodromes have to be functional, dark, unremarkable buildings. The ODA wanted to create something special and if you drive along the A12 you will see that the velodrome dominates the skyline with its iconic roof designed to reflect the geometry of the cycling track.

We also want to make this the fastest track in the world, so the designers and contractors have procured hard-grown pine from Siberia, which will then be planed in Germany, and brought to the site in the coming months to help to create a record-breaking

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track. The facility is a beacon to sustainability and it has a unique cable-net roof which weighs roughly half that of any similar building, helping to create a highly efficient building. It will include the use of daylight through roof lights and external glazing which reduces the need for artificial lighting and allows natural ventilation. Also, water-saving fittings built into the design allow the collection of rainwater for reuse in the building, helping to reduce water consumption.

Ensuring accessibility to the venue presented real challenges for the design team. Most other indoor cycle tracks offer only limited accessibility as a result of the complexity of accessing all areas around the track. Our design overcomes this by adding two ramps beneath the track area which access the infield. The 6,000 seats are split above and below a fully accessible public concourse that runs around the perimeter of the trackside seating, allowing wheelchair access to the best viewing points in the venue.

The velodrome will showcase the best of UK engineering and construction with companies from across the UK coming together to build the venue. It is on time and within budget and will be the first venue on the park to be completed next year. It is being constructed by a British company, ISG, which was also responsible for replacing the track at the Manchester Velodrome. Suppliers from across the country are also involved, with the steel coming from Bolton, for example, which is providing jobs in difficult times. We are the best in the world at track cycling and we want to give our Olympians and Paralympians the best chance of success in 2012. Testing the venue for a year and training inside it will be an important part of that, so it has to be finished on time.

In conclusion, the project remains on track and within budget. It will create a park that showcases the best of UK plc in all our venues. I think we would all agree that the economic, sporting and social benefits of 2012 are already showing. When you look at the effect that the World Cup has had on South Africa, you start to grasp the effect that will be created here in 2012. The spirit of the Olympic and Paralympic Games speaks to the whole country, young and old, and is especially vital in tough times.

Finally, as my noble friend Lady Ford said earlier, I would be extremely happy to arrange visits to the site in east London for fellow Peers who have not visited the park. By seeing the construction at this stage, rather than when it is finished, you start to understand the scale of the work that has been undertaken.

4.55 pm

Lord Addington: My Lords, it is a great pleasure to take part in this debate. I take this opportunity to welcome the noble Baroness, Lady Grey-Thompson, from these Benches-or rather from this tier of these Benches, as I am sure my colleagues in the coalition will also take the chance to welcome her. I still keep thinking of her as Tanni Grey-Thompson rather than as a Baroness.

I got accused of being an expert on sport when I spoke in the debate on the Queen's Speech. I told the noble Earl, Lord Howe, that I would eventually forgive

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him for that slight. There is expertise in this debate, and the noble Baroness encapsulates it better than just about anyone else here. I hope that we will see her speak here not only on this subject but also on disability matters. Once again, I speak with a degree of self-interest because I was disability spokesman for my party for 14 years, and I currently speak on sport. I suggest that the noble Baroness and I will be bumping into each other a fair bit in this Chamber, and I welcome her to it.

The main thrust of this debate about the Olympics is that we are getting ready and have got over the hard yards. I believe that the noble Lord, Lord Coe, used that expression when congratulating the entire Olympic movement on being fairly boring as far as the press are concerned because, as the noble Baroness, Lady Morgan, said, there were dozens of very grumpy journalists who had articles about how the Games would be delivered late and over budget. They have dumped them. We have got to encourage everybody to make sure that they have to think of something new to say. We are on the edge of being able to go for it.

No matter how great the venues are, if they are the only thing that is left, they will not touch more than a very small percentage of the population. Enthusiasm for sport in general and for participation and volunteering can be generated by these Games, which have the opportunity to go beyond a small section of the sporting public and touch those beyond that group in a way that nothing else can. We must encourage that.

When he opened this debate, my noble friend spoke about school sport. I will upbraid him slightly for that because schools cannot deliver this by themselves. People who have been involved in this for many years have always recognised that they are merely a part of it. It is the link between school-age sport and clubs that will lead to growth. I have given my noble friend a little notice that I hope that when he answers, he will let us know the intermeshing of clubs that will allow competitive sport to go on-I do not know why I am using the phrase "competitive sport"; I think non-competitive sport is simply exercise-and be a part of people's lives. The drop-off ages are 16, 18 and 21, and it does not take a genius to work out why-that is when people stop going to institutions where sport is compulsory or easy. It does not matter about making it easy or compulsory in those places if you do not have somewhere to go. If the Government do not do this, in effect they will be systematically wasting quite a lot of money. They have got to build up the link.

Also, to be honest-and this is true of all Governments; there is nothing I am saying here that I did not say a few months ago, so I might be forgiven if I get mostly the same answer again because it is a work in progress-we must make sure that sport is taken seriously by the rest of Government, not just by the DCMS, although now that it has the Olympics it should be more coherent. However, unless the Department of Health and the Department of Education are prepared to ensure that sport really fits in, and unless local government decides that it is really going to integrate sport and allow it to have a place, it does not work. You have got to make sure that it all meshes together. In the time I have been here, this has become better understood across government; it is not a party political issue. Sport and government have got to come together.

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There has got to be more drive towards this, but it is always a case of "Oh, that's not really my responsibility", so it does not happen. I have heard that for most of the 13 years I have been here. The whole of government as well as Ministers at the top have to make sure this happens. I have also spoken more times than I care to mention about having to punch through the Chinese walls in Whitehall to get anything done. We have to make sure that there is a central drive. If the Olympic Games achieve their potential, they will provide a wonderful way of kicking some holes in those walls and making sure that people understand what they are doing.

I will not ask my noble friend a specific question about the importance of integrating sports medicine more closely in the medical structure. All these things must take place to make up the whole, but we must remember the central theme. We have an opportunity of doing ourselves a considerable favour in the long term and of throwing the biggest party on earth. If we mess this up, we will deserve everything we get.

Office for Budget Responsibility


5.01 pm

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, with the leave of the House, I shall now repeat a Statement made earlier in another place by my right honourable friend the Chancellor of the Exchequer.

"Mr Speaker, with permission, I would like to make a Statement on the Office for Budget Responsibility, which this Government created on coming into office. This morning, for the first time in British history, we have opened up the Treasury books and allowed the publication of an independent and comprehensive assessment of the public finances. From now on, Governments will have to fix the budget to fit the figures instead of fixing the figures to fit the budget. I would like to thank Sir Alan Budd, the members of the Budget Responsibility Committee, and all the staff for the impressive work they have done.

There has been some interest in whether the OBR will publish all the relevant underlying assumptions and judgments driving the forecast. Today's report does more than that. There are over 70 pages of detailed material, much of which has never been seen before. For the first time ever, the Government are publishing the assumptions that lie behind the estimates for average earnings, property prices, interest rates, financial sector profits and, crucially, a five-year forecast for annually managed expenditure. This includes a forecast for the amount of debt interest that we as a country will pay over the coming years.

The creation of the OBR has already impressed the international community and has been praised by the International Monetary Fund and the G20. We will now move to put the OBR on a statutory footing with legislation included in the Queen's Speech. So from now on, Members of Parliament sent to this House to scrutinise how the Government spend taxpayers' money will for the first time have access to the honest figures.

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Let me now turn to those figures and what the OBR has uncovered. First, the forecasts for growth in the economy. The OBR is forecasting growth to reach 1.3 per cent this year and 2.6 per cent next year. In future years, the OBR's forecast is for growth of around 2.8 per cent in 2012 and 2013, and then 2.6 per cent in 2014. The forecasts for growth are, sadly for our country, lower in every single year than the figures that were announced by the previous Chancellor at the time of the last Government's Budget in March. He told us that growth would soar to 3.25 per cent in 2011 and then to 3.5 per cent in 2012. At the time these forecasts were given, neither the Bank of England nor 28 of the main 30 private institutions producing forecasts for the UK were offering such an optimistic central view of the economy. We can only speculate as to why such rosy forecasts for a trampoline recovery were produced only weeks ahead of a general election.

Let me now turn to the OBR's forecasts for the public finances. The latest out-turn data show public sector net borrowing for the last year was £156 billion. The OBR is forecasting that it will be £155 billion this year. It is the highest budget deficit of any country in the European Union with the exception of Ireland. It is £10 billion less than the forecast given only a month before the end of the last fiscal year, but I can tell the House that, based on the OBR's figures, the £10 billion advantage we start with decreases to only £3 billion by the end of the Parliament. The reason for that is that the cyclically adjusted current balance-commonly known as the structural deficit-is forecast to be higher in every single year than what this House was told in March.

This is the most important figure in this report because the structural deficit is the borrowing that remains even when growth in the economy returns, and it is the structural deficit that is a key determinant of whether the public finances are sustainable. This year, the structural deficit is forecast to reach 5.2 per cent of GDP; that is £9 billion higher than we were told in March. Next year, the structural deficit will be £12 billion higher than we were told.

Turning to debt, the OBR's forecast sees it rising as a share of GDP throughout the Parliament, and the interest on that debt, which we as taxpayers have to pay, also grows every year. Let me be the first Chancellor in modern history to give you those numbers for the coming years. The OBR forecast is that this is what Britain will have to pay for its debts: £42 billion this year, then £46 billion next year, then £54 billion, then £60 billion, reaching £67 billion in 2014-15-more than a quarter of a trillion pounds coming from the pockets of the taxpayer over the course of this Parliament simply to service the debts left by the previous Government.

The figures produced by the OBR also give us a new insight into the spending plans we inherited as a Government. They show that, given the OBR's assumptions, the previous Government would have had to find £44 billion of spending cuts in departmental budgets in order to deliver their plans. I can confirm that I have found no evidence at the Treasury for how even a single pound of these £44 billion of spending cuts were ever to be achieved.

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There are two other very important considerations that relate to these forecasts, and which understate the situation we inherited. First, these are central forecasts with a fan chart around them to represent the great uncertainty that exists, rather than a Treasury forecast based on an arbitrary reduction in the trend level of output. As a result, they understate the increase in the structural deficit and the reduction in growth. Secondly, these projections have been based on recent markets interest rates, which are about a third of a percentage point lower in Britain than at the time of the election, and, as is widely acknowledged, this in part reflects the investors' confidence that the new coalition Government will take action to deal with the deficit. As a result, as Sir Alan points out in his report,

This is absolutely crucial to understanding today's figures, because if we had followed the fiscal path set out by the previous Government it would, in Sir Alan's words,

than forecast in the OBR report.

Let me conclude with this. The independent report published today confirms that this coalition Government had inherited from its predecessor one of the largest deficits in the world; forecasts for growth lower than the country was told at the time of the election; a larger structural deficit than previously admitted; a debt interest bill larger than the schools budget. It is indeed worse than we thought. And the public would have known none of this if we had not set up the Office for Budget Responsibility. Next week I will return to the House to explain what we will do about it. In the mean time, I commend this Statement to the House".

My Lords, that concludes the Statement.

5.10 pm

Lord Eatwell: My Lords, I thank the Minister for repeating the Statement made by his right honourable friend in another place. This is a remarkable Statement, not only because so little of it relates to the concrete forecasts in the document that it purports to describe but also because it fails to note comments that the OBR makes on the earlier analysis of the economy presented by my right honourable friend Alistair Darling.

During the past few weeks, since the formation of the coalition Government, we have been subject to a barrage of statements from the Prime Minister claiming that the underlying position of the economy is far worse than that laid out by Mr Darling in his March Budget. For example, the Prime Minister said on 7 June:

"The overall scale of the problem is even worse than we thought".

Yet what does the OBR report argue? I quote the OBR's press notice:

"The nominal figures for the deficit and net borrowing are better in all years than in the March Budget".

On numerous occasions, the Chancellor of the Exchequer has cast doubt on his predecessor's integrity in presenting economic forecasts-he could not even resist the odd snide remark today. Yet the OBR report states:

"The forecast is based on a range of possible outcomes around a central view ... This differs from previous practice under which some assumptions were designed to add caution to the fiscal forecast".

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As the official press notice puts it, the methodology of the OBR replaces,

So not only have things turned out better than Mr Darling argued in March but the reason is probably that he was so persistently cautious. Mr Darling is owed a formal apology. I hope the noble Lord will make that apology which the OBR report demonstrates in all common decency to be necessary.

The general forecast in the OBR report is for a lower trend rate of growth than was presented in the March Budget. What is not made clear is how the assumptions made by the authors of the OBR report differ from those on which the earlier forecast was made. It is the variation in the assumptions that is the source of the different forecasts.

In the limited time available, I have managed to unearth the fact-and it took some unearthing-that the assumed rate of growth of the eurozone is significantly lower, which, given what has happened since March, is perfectly reasonable. Will the Minister tell us what other key assumptions have been changed, and why? How has the assumed rate of growth of consumer expenditure been changed, and why? How has the assumed rate of the growth of business investment been changed, and why?

There is but one key element in the OBR report which might be deemed critical of the previous Government, and on which Mr Osborne focused in the Statement. It is the so-called structural budget deficit-not the actual budget deficit-which the report shows to be worse than was reported in the March Budget. I hope that your Lordships will forgive me if I spend a few moments unpicking this disagreement.

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