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Olympics feels wind of more austere times

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David Bond | 08:43 UK time, Tuesday, 27 July 2010

On a recent visit to London's almost-finished Olympic Stadium I asked Lord Sebastian Coe, the figurehead of the 2012 Games, if he would still have launched the bid to stage sport's biggest and most expensive event if he had known the global economic downturn was just around the corner.

His response was an emphatic, unequivocal yes.

Without the Games, he argued, the British economy would have missed out on a major stimulus at a time when it needed it most.

Without the Games thousands of jobs for local workers would not have been created or contracts won by British companies.

Olympic Park with two years to go

And without the Games there would have been less incentive to tackle the shortage of housing and sporting facilities in east London, one of the country's most deprived areas.

These are persuasive arguments. But there can be no question that if David Cameron's coalition government was today faced with the option of bidding for an Olympics which, at the last count, will cost the public purse £9.28bn it is likely Britain's new Prime Minister might just say, "thanks, but no thanks".

Even Coe, the most impressive flag-waver British sport possesses, acknowledges there is a need for everyone involved in the Olympic project to be sensitive to the changed times.

And how changed they are. Three months before Coe delivered London's successful appeal to the International Olympic Committee in July 2005, Chancellor Gordon Brown announced in the budget that public borrowing was £34bn and predicted economic growth of 3%.

In his emergency budget this year, Chancellor George Osborne disclosed borrowing of £149bn and predicted just 1.2% growth. Osborne and Cameron have since embarked on a review of all public spending as they try to get debt back to 2005 levels by the time the Olympics start.

As the spending cuts bite and people feel the pinch, will the London Games come to be seen as an act of largesse the country quite simply could do without?

Already the Olympic Delivery Authority, the body charged with delivering the vast building project rising impressively out of the dust at Stratford, has been asked to find £27m of savings as part of the emergency budget.

And the likelihood is more cuts will come when Osborne announces the government's Comprehensive Spending Review in October.

Hugh Robertson, the Minister for Sport and the Olympics, says the government will do nothing which jeopardises the successful delivery of the Games.

But he admits in an interview with the BBC that ministers could raid the contingency set aside for cost over-runs and unforeseen risks.

According to the most recent figures released by the Department for Culture, there is £1.2bn left in the contingency pot. But that is forecast to fall to £527.8m by 2012.

At almost 6% of the cost of the Olympics that is a significant sum. The question for the government is whether it risks reducing the budget only to have to put it back up again if things go wrong nearer the time.

For while the construction of the Olympic Park may be 70% complete with exactly two years to go, there are still plenty of other risks waiting around the corner.

The major one is security which is being handled by the Home Office and currently has a budget of £600m with a contingency pot of £238m. Any sort of terrorist threat in the next 12 months could lead to a major cost revision and present a serious financial problem.

The second risk is the organising committee coming up short in its fundraising efforts to actually put on the Games.

In simple terms and to remind any readers still unsure about how all these various Olympic bodies work, the government and its building arm the ODA is responsible for building the stages on which the athletes will perform. The London organising committee (Locog), chaired by Lord Coe, is responsible for producing the show.

That part of the operation has a budget of £2bn. And according to the latest available figures, Locog has raised three quarters of that sum privately from sponsors and via the International Olympic Committee's marketing and television rights deals. The rest will come from ticketing and merchandising, but should there be a gap, Robertson admits that the government will have to step in.

And why? Because, unlike other public sector funding commitments, ultimately this or any other government can do nothing about the immovable Olympic deadline of 27 July 2012.

Comments

  • Comment number 1.

    Whilst it is true that since the Olympics were won by London the world and the economy has changed, it cannot be overlooked how the ODA and LOCOG have adapted to the changes when required. They have been asked to save 27 million and already they have announced these savings have been made. Whilst the budget and manpower is not the same as Beijing I don´t think this will affect London badly in anyway, in fact I belive this will work in London´s favour.

    The Olympics is about showmanship, taking part and getting the world involved. You do not need a large budget for this, what you need is the right stadia and venues and the right people leading it and the country behind them (one thing Beijing could not do!)

    London has shown that an Olympics can be produced, made and presented in en economic crisis and because of that these Olympics will be a benchmark to other cities.

    London 2012...the Games of London, the Games of GB & NI, the Games of the World

  • Comment number 2.

    That's Lord Coe, or Sebastian Coe, not Lord Sebastian Coe.

  • Comment number 3.

    The residents of Mexico are still paying, via a levy on new cars, for the Olympics of 1968. I can't help wondering how long London council tax payers will have to cough up for this white elephant? It’s nothing more than a hugely expensive vanity project for the likes of Sebastian Coe, the vast majority of people in the UK are totally uninterested in most of the Olympic sports (when was the last time anyone paid to watch a game of handball), so it’s not like it’s addressing an unfulfilled need. We should be demanding that participating countries should be sharing the costs; otherwise we should cancel it now and spend any remaining money on building far more affordable housing on the site.

  • Comment number 4.

    Why is there still always someone posting to say we should cancel the Olympics as if that was a viable option? The legal costs to extricate us from all the signed contracts would be crippling. You'd end up having to spend all the costs of hosting an Olympics without any of the gains, and damage the reputation of the UK worldwide.

  • Comment number 5.

    It will certainly put the spotlight on the UK for 2 weeks, just like it did with China. Hopefully this will encourage overseas investment and tourism, which I'm sure has the potential to more than cover the cost of the games over time.

    People are always negative and like to look at the downside. We've got the Olympics! I don't watch any of the sports represented, but I can still appreciate that it will be a great advert for UK Plc. It will also regenerate a very poor part of the country.

  • Comment number 6.

    I am confident that in terms of sport alone 2012 will be a great success. Not quite so sure about ticketing arrangements especially for us Londoners or whether people will be able to travel easily around. Two years may seem some time away but it is not long enough to make substantial changes to the transport network given how long even routine work takes on the tube. Maybe they can all cycle there using the new bikes.
    1948 was an austerity games and 2012 will be too. Possibly only USA, India or Russia could afford to hold the games in the style set by China and GB should not try to compete in those terms. What we can do is to embody the olympic spirit in 2012 and show the world that the Olympics will unite us in excellence and not divide us by petty politics.

  • Comment number 7.

    In this era of the 'Big Society' isn't there an opportunity here to get voluntary funding of the olympics? Stop charging the whole population wherever they are in the country and ask for donations to fund the games. Maybe then we'd see just how much support there is for the games.

  • Comment number 8.

    "Without the Games thousands of jobs for local workers would not have been created"

    Shame that those thousands of jobs are unpaid. Doesn't that rather change the equation about it being an economic stimulus?

    And it it compliant with minimum wage legislation?

  • Comment number 9.

    You always get the impression that these big publicly funded arenas like the Commonwealth Stadium in Manchester, the Millenium Dome and the Olympic Stadium in London cost the public an absolute fortune to help finance and then are just handed over to football clubs and music moguls to reap the rewards? Surely the government could run the venues long-term as sitting landlords and recoup a lot of money from all the events they stage? We are never really told who really makes all the money out of these things but we happily keep paying for them. Regeneration of these sites alone are great for property developers and speculators.

  • Comment number 10.

    And without the Games there would have been less incentive to tackle the shortage of housing and sporting facilities in east London, one of the country's most deprived areas.
    -----------
    Don't be daft Coe.

    East Londoners have some of the best sporting facilities in the country within a half hour bus/tube ride of their homes. Millions of people outside of London can not lay claim to that. The games is actually losing the area housing and ramping up the cost of what is there beyond the reach of locals anyway.

    London is gaining yet another stadium/Arena to sit alongside The Emiraes, Wembley, White Hart Lane, The O2.... Most sports are getting little to no legacy investment (the shooting facility for instance is costing money to construct and will be demolished straight away).

    I'm happy enough fo the Games to be there, it will bring the country a profit from tourism definately but please stop pretending that it will do us any real long term good because it's simply lies.

  • Comment number 11.

    One wonders whether if the actual cost of £9bn had been given at the time of the bid rather than the much lower £4bn whether the public would have supported the bid even the recession had not happened.

    The underestimate gave rise to the belief the games are over budget, when actually the first suggestion was simply wildly off target, as this article shows:

    http://bit.ly/coQX2N

  • Comment number 12.

    8. At 1:26pm on 27 Jul 2010, DisgustedOfMitcham2 wrote:
    "Without the Games thousands of jobs for local workers would not have been created"

    Shame that those thousands of jobs are unpaid. Doesn't that rather change the equation about it being an economic stimulus?

    And it it compliant with minimum wage legislation?

    ----
    How about the thousands of jobs in the construction sector? You know, the sector that's actually fuelling what economic growth we've got at the moment

  • Comment number 13.

    #12:

    Read this.

  • Comment number 14.

    Why do we need to run the riot act about the economy with the Olympics?
    In 2012, London and the UK will reap the benefits, 4 of the arenas will be dismantled and given to different areas.
    The Football Tournament will give places such as Coventry a boost to their flagging economy and the West Midlands have won more contracts for 2012 than any other area.
    This can work for the UK, we have to stop the people who use the cane to smash the dreams.
    We won it in 2005, we arent bidding for an Olympics in 2020 now are we?
    We've got it, we have the Money and it will really transform the UK to be proud of itself and its Sports, its not London's Olympics, its BRITAINS OLYMPICS!

 

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