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What will be the true cost of London 2012?

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David Bond | 10:03 UK time, Friday, 9 March 2012

It was only 10 days ago Olympics Minister Hugh Robertson declared that recent worries over the London 2012 budget were subsiding.

Pointing to the £500m of contingency untouched in the last three months, Robertson said he was as confident as he could be that the Games would not exceed the £9.3bn public sector funding package.

Today's report by the Public Accounts Committee seems to agree with him, with PAC chair Margaret Hodge insisting the Games are "on track to be delivered on time and within budget".

But then the report also contradicts that assessment by arguing that the true cost of the Games could be nearer £11bn once the £766m price tag for buying the Olympic Park land and £826m of legacy projects are taken into account.

Olympic park and City of London

The true cost of the 2012 Games could yet be felt in London's nearby financial district. Photo: Getty

Of course, it is not the first time we have heard this argument. And many people find it hard to understand why some elements of public expenditure fall within the £9.3bn funding package while others do not.

For example, there will inevitably be security costs beyond the £475m set aside in the Olympic budget. If that money comes out of the Metropolitan Police or Home Office budgets, should that be considered an Olympic cost?

And what of the funds spent by other government departments, such as the Foreign Office, whose job it will be to look after visiting dignitaries and heads of state. Is that an Olympic cost?

It used to be sufficient for the government to say the £9.3bn was an infrastructure budget, set up to pay for the venues of the Olympic Park.

But with that money now being used for so many different areas of the project - security, ceremonies and other operational requirements associated with the actual staging of the Games - that argument no longer holds.

So in that sense it is right that the PAC should question whether the real bill is much higher and to call for a full and thorough audit of all the public money that has been spent on putting on the Olympics when the Games are over.

On the two specific points raised by the PAC, the Department of Culture, Media and Sport is clear that they should be treated separately to the £9.3bn.

It says the £766m for the land acquisition will be repaid once the site is sold after the Games. Less convincingly perhaps, it argues that the £826m for legacy projects comes from "existing business as usual" budgets.

Most people will look at all this and find it meaningless to quibble over which department is spending what on the Olympics. Ultimately, it all comes from the same source and "Olympo-cynics", as Boris Johnson calls them, will say it is money that should not have been spent at all, especially when there is such a squeeze on the public finances.

The PAC report also flags up concerns about the pressure on the budget of the London Organising Committee of the Olympic and Paralympic Games (Locog), which was always supposed to be a separate and entirely privately-funded enterprise.

But almost £1bn of public money is now being spent through this committee (Locog), while the PAC says the government, as the ultimate guarantor, could end up on the hook for even more money.

With this in mind, it is still worrying that, despite all this taxpayers' money being pumped into the Locog, it remains subject to less scrutiny than government departments and publicly funded bodies like, say, the Olympic Delivery Authority.

Locog has already been heavily criticised by the London Assembly for being overly secretive on the controversial issue of ticketing. Perhaps the time has come for London 2012 officials to become much more open with us.

Comments

  • Comment number 1.

    I have boycotted your blogs for a while, but thought I would come back to see how they are, but again its negative, convoluted and I am not really sure what the story is.
    The fact that the land will be re-sold becomes a non-story. The legacy elements have always been set aside, as these will be used by the communities for many years to come - so effectively this money should/would have been spent anyway.
    So the we come back to Locog bashing, which at times is fair, but hardly newsworthy.

  • Comment number 2.

    Remember, when the bid was put in for the 2012 Olympics, the budget was £2.4 million. If I offer to go to the supermarket for you to buy a loaf of bread, would it be reasonable for me to boost the price by 300%?

  • Comment number 3.

    Hi David we really needed another blog about the cost of the games, I mean it's not like it was the topic was covered by you less than a month ago...oh wait....

    I already said my two cents and more in that blog. We'll see the same argument trotted out those who are for the games, other who are not. Can we please discuss something, anything else about their delivery? Were at the point now of they'll cost what they'll cost and arguing over the spending of that money is waste of time.

  • Comment number 4.

    In defence of Mr Bond the MPs committee coverage has brought this topic back into the public domain and for the sake of balanced coverage he probably feels like he has to comment. Either way there will be complaints.

    My bet is that a true final figure will never see the light of day. Like the Dome there will be costs and benefit estimates that maybe in 2020 will again be dissected by a parliamentary committee for lesson learned. Move on....

  • Comment number 5.

    It really is not a waste of time to ask public bodies to justify themselves when they don't do what they say they'll do.
    It'll cost £2.4 billion (not that I've checked that that was the original figure) ... oh, sorry, it's a bit more.
    The NHS is safe in our hands ... (5 years from now) oh, sorry, not so safe in the hands of contractors or asset strippers.
    We're all in this together ... oh, housing benefit gets cut but we mustn't upset the relatively "poor" in expensive houses, who can't be made to downsize by having to pay a mansion tax.
    We have to save money by reducing the number of courts ... oh, a court building closed 30 years ago still hasn't been disposed of.

    We know what we'd like to do, but if we told you, you'd string us up, if only metaphorically, at the polls, so we'll start gradually and apologetically, with no current plans ...

  • Comment number 6.

    I don't think there's been a games brought in either on or under budget anywhere in the world. The sad fact is that there are a lot of 'white elephant' stadia around the world that have either been demolished or just abandoned. The legacy for most is people have been paying the cost for decades after holding the games. Our games started out at around the 2.5b mark and has gone skyward ever since. There are other costs not directly by LOCOG but in terms of transport etc. Mega wage deals asked for and in most cases given, to train, tube and bus drivers. This on the basis Unions threatened strike action prior to and during the games. The BBC, despite stringent cuts across the board have spent bob knows how much on preparartions to broadcast the games. Even the news channel now has a new dedicated 'Sports Centre' to broadcast sports news. What was wrong with the way they did it before? The true costs won't be known for some time after the games are finished but my bet is, Londoners in particular, will be paying for this for decades to come. Sad but true I fear.

  • Comment number 7.

    @6 - Actually, BMT, it will be the rest of the country that pays for it while London reaps the benefit of improved housing, infrastructure and facilities.

    At least you get something out of it - the rest of us don't.

  • Comment number 8.

    No one will ever get to know the true cost..... but us tax payers will feel it as always!

  • Comment number 9.

    @7 goggyturk
    Hi, I won't benefit, I don't live in or near London. As for the improved infrastructure, I doubt there'll be much for the 'working masses' so to speak. The Olympic village is supposed to be used after the games for a mix of social and private rented accomodation but at what price? ie, what rents and will they be affordable? What commercial use will be made of the land after the games? Will there be new/more work for locals? One could grudgingly agree that barren wasteland and some of the contaminated land thats been cleared is good but again at what cost and what of the future use? One could argue that redevelopment was needed regardless of the games, whether it would have been on this scale and as quick is debateable. I somehow doubt it and that still leaves the legacy of cost for decades after the event.

  • Comment number 10.

    What would be really nice is if the Sports Editor actually wrote about sport itself rather than the business and finance of sport. The inestimable Robert Peston is perfectly capable of doing that. It makes me think David Bond doesn't know that much about sport itself - which is a little odd for the BBC's sports editor

  • Comment number 11.

    I don't think this is about whether you support the games or not. It is about truth, honesty & transparancy by the Government. It is taxpayers money after all and we have worked hard to earn it. The Government should tell us the true total cost of the games.

  • Comment number 12.

    In the context of the British media negative culture, the ODA will be loving these articles which really have nothing to say. The reality is that the Olympic budget was set five years ago and has fundamentally not changed:

    Venues (including legacy conversion) 1,063M (+3)
    Transport infrastructure and operating costs 794M (+94)
    Additional inflation allowance, contribution to the Olympic Village and Insurance 386M (+386)
    Programme Management 570M (+554)
    Site security 268M (+78)
    Infrastructure and regeneration costs associated with the Olympic Park 1,673M (-11)
    Contingency (excluding tax) 500 (+500)
    Support for elite and community sport 290M (-10)
    Paralympics 66M (+12)
    ‘Look of London’ costs 32M (0)
    Tax (on ODA costs) 836M (+836)
    General programme contingency (including tax) 2,247M (+2,247)
    Policing and wider security 600M (+600)
    (Change from 2005 bid book cost in brackets)

    Source: National Audit Office, 2007 (http://www.nao.org.uk/publications/0607/the_budget_for_the_london_2012.aspx)

  • Comment number 13.

    Regarding the "existing business as usual" budgets, the Government has absolutely no obligation to spend these in east London. However, perhaps it has a moral obligation? London is a huge net contributor to the British economy yet has some of the poorest people in the country. Its pay back time!

 

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