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Update: 2012 budget already using contingency fund

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Mihir Bose | 15:04 UK time, Thursday, 22 January 2009

As I revealed last week the Government has today confirmed that they will be dipping into the contingency fund to make up for the lack of private money for the building of the Olympic village and media centres.

I said several hundred millions would be taken. It has turned out to be £394 million from the Olympic Funders Group contingency, the part of the budget designed to guard against risks outside the control of the Olympic Delivery Authority (ODA).

A further £67 million has been released from the ODA's programme contingency making a total of £461 million for the village and media centres. Of this, £326 million will go towards the Olympic village and £135 million towards the International Broadcast and Main Press Centres (IBC/MPC).

In addition there is money for what may be called general contingency, £35m for a number of other projects like power lines and stadium work.

All this adds up to total of £496m, leaving £1.5 billion in the contingency pot.

When the budget of £9.3 billion was agreed by ministers back in March 2007 it contained a contingency of £2.7 billion. The contingency was designed to meet cost over-runs not shortfall from the private sector, which is what it is now largely being used for.

Then no-one had anticipated a credit crunch.

Indeed in addition to public money the Olympics was meant to attract over £1.2 billion of private money for the village and media centres.

Private sector money may ultimately come but the project has to be funded and unlike other projects such as Wembley you cannot put the start date back.

Despite this, Olympics minister Tessa Jowell remains confident the contingency is adequate and the budget robust.

She said: "With private sector funding now much more difficult to secure because of the global economic downturn, it is right that we take steps to safeguard these projects.

"The extra funds we have allocated today come from existing contingency funds within the overall £9.3 billion budget. Lower than anticipated construction inflation and good progress across the project has reduced risks, meaning that the overall budget is unchanged and enough contingency funds remain. We are determined to deliver the Games within budget."

But as the contingency gets eaten into, and with no knowing how the credit crunch will bite, the robustness of the budget will be tested.

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  • 1. At 4:02pm on 22 Jan 2009, JoDan wrote:

    The 9.3 billion budget has always been a ridiculous figure, far too low.

    By the time 2012 has been and gone the figure will be well over 15 billion and could even go beyond this.

    The problem now is the fact that London 2012 have committed to do so much that they cannot turn back or downsize on more than a couple of events.

    Sadly the Government will continue to mislead the public and claim it will come in under budget.

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  • 2. At 4:04pm on 22 Jan 2009, mylittledonkey wrote:

    This is not news, nor a vindication of your previous blog.

    Con-tin-gen-cy
    noun, plural -cies. 1. dependence on chance or on the fulfillment of a condition; uncertainty; fortuitousness: Nothing was left to contingency.
    2. a contingent event; a chance, accident, or possibility conditional on something uncertain: He was prepared for every contingency.
    3. something incidental to a thing.

    The contingency fund was designed to allow for, let's say, a possibility conditional on something uncertain.

    As you say, then [March 2007] no-one had expected the credit crunch.

    Just as well they've got a contingency fund. It sounds like this is exactly the sort of thing for which it would be used.

    Surely this is only of any significance if the contingency fund is completely used up? In the interim, I'm actually with the politicians on this one, and that takes a lot of doing.

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  • 3. At 4:14pm on 22 Jan 2009, MarktheHorn wrote:

    Lets just hope this money is worth it because the Taxpayers will quite rightly not be happy if the Olympics is a flop and no legacy comes out of it for future generations.

    All this negative spin on the games cannot be good for morale of the athletes taking apart but the fact it the country and world are in trouble money wise ofcourse so this mass spending on one event that maybe everyone doesn't like/agree on is going to cause such strong debate.


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  • 4. At 7:00pm on 22 Jan 2009, JamesStGeorge wrote:

    The farce of taxpayers, lottery funds all being fleeced for a very few people's hobbies, sports so called, that not enough people are interested in year in year out to make them self funding like football, golf, F1 etc. No they come begging out of our pockets for their hobbies. Facilities to play their hobby in, and a free hand outs to train for years on too.

    So a few succeed; our money funds their fame, rewards, CBEs, OBEs, big money rewards too for some from the likes of adverts, all from funding by OUR taxes. What do WE get for it all?

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  • 5. At 9:33pm on 22 Jan 2009, Chilli Puzzle wrote:

    who cares about an olympic village?
    lets buy kaka instead

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  • 6. At 9:58pm on 22 Jan 2009, MarktheHorn wrote:

    James - Whilst I agree they are given funding and infact we do best in sports which GB have far great resources than most countries like Rowing/Cycling people such as Becky Adlington and Chris Hoy did have to start as kids to compete in their sports through self motivation and own resources (family money?) rather than just rely on handouts.

    Ofcourse there will be some athletes who don't achieve and then blame the lack of funding despite getting help over many years like certain athletics people.

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  • 7. At 10:01pm on 22 Jan 2009, EnglandJohn77 wrote:

    who cares what it costs and what money is used, the banks get given billions in bailouts and there will be more to come, we'll be paying for that for the rest of our lives so we just aswell be happy we'll have the olympics and probably the fifa world cup in 2018, in the next 10 years this country will host most major sports at the highest level and we need to celebrate that and stop moaning!

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  • 8. At 10:02pm on 22 Jan 2009, THENUNNYFOXES wrote:

    Do we need an Olympic Village when Tower Hamlets has a lot of high rise Flats?
    Why not clear them all out and put the Olympians in..wont cost as much, you can clean up with half the money and also you can paint them.
    Also for the Broadcast centre...there are a lot of warehouses in the area...why not turn one into an Olympic Media Centre and also stick a few boxes on top of each other with scaffolding..bet China didnt think of that!

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  • 9. At 01:04am on 23 Jan 2009, jazza0707 wrote:

    The initial cost estimation figures were always far too low and the government weren't kidding anyone when they claimed that they would be stuck to. Maybe they themselves believed it and maybe the still do, however if this is the case then its a very worrying sign concerning the people we have in charge of this country.

    I personally believe that the government should go all out for the Olympics and give the British public and indeed the world, the greatest show possible. The Olympics is a the greatest show on earth and in all likely hood, we will never host it again in our lifetimes. So why hold back? It should be about more than costs, especially when the government is giving out ridiculous multi billion pound loans ever day of the week which they cant seriously believe they will ever get back.

    From a student who is going to come out of uni with over £20,000 debt and rising due to interest which Labour claimed was never going to be added on, i want to see some of my money going to something that i cant wait to see, rather than us holding a ceremony that makes us ashamed to be British as is so often the case.

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  • 10. At 1:19pm on 23 Jan 2009, sinicoll wrote:

    I thoroughly agree with point 2.

    I believed taxpayers money was spent on recruiting Mr Bose for

    "analysis and context to the major sports news stories across the BBC's news programming".

    I think your average GCSE student would've been able to come up with this blog - combining a Government announcement with basic Olympic budget information on Wikipedia.

    Beyond some largely baseless gloating, I detect no sign of analysis or insight in the above.

    Perhaps more should be made of the "fantastic catalogue of contacts" for future blogs....


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  • 11. At 2:10pm on 23 Jan 2009, Aggieskipper wrote:

    My sources tell me that the original designs for the Olympic facilities are already being massively scaled back. Take the Media Centre for example what was going to be a spectacular building and wonderfull broadcasting legacy of the London games is now going to be a temporary building in a tent - well a bit of licence there but in any case nothing like the original concept/design and sure to bring a few guffaws from the world's press when they descend in 2012. Any comment Mihir ...

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  • 12. At 01:26am on 25 Jan 2009, localhero wrote:

    The likes of Chis Hoy will become multimillionaires on the back of TV appearances and sponsorship deals - the latest I’ve seen is Kelloggs bran flakes. Recently the tax payer had to stump up even more money to pay for the funding of these Olympic sports, and make good the shortfall which UK Sport failed to raise from sponsorship. Rather than get the country into more debt in order to pay for a few elite sportspeople the solution is simple - just take back 10% of their earnings from sponsorship deals - and I’m sure we could significantly reduce the tax payer’s burdon!

    We could also reduce the tax burden of these London Olympics if those Olympic athletes we are paying for put some of their sponsorship endorsements back into the pot rather than keeping all the money for themselves! Alternatively, they could pay for the services they receive e.g. medical care and physiotherapy once their earnings go above a certain threshold. The 600million funding package for team GB leading up to 2012 was made up of 200million from central government i.e. taxpayers money, 300million lottery cash and a further 100million was supposed to have been raised by UK Sport from private sponsorship. UK Sport failed to raise the 100million, so the shortfall was found from lottery cash plus another 29 million of tax payer’s money.

    If UK Sport couldn’t raise the shortfall from private sponsorship, my point is that surely the athletes and sports benefiting from this unprecedented level of funding should at least pay a small proportion back into the kitty to help everyone else - especially those athletes set to make a tidy income from their new found fame and success. I've stopped buying lottery tickets since money for grassroots projects has been cut. Why should the taxpayer plug the shortfall? We are in the midst of a serious public financial crisis and the country is getting further and further into debt - so surely instead of expecting the tax payer to pay for everything for a few sportspeople to have a platform to promote themselves in London a small proportion of their earnings should go back into the fund to pay back the taxpayer and fund the future. Who else would receive so much public money to fund them to train and become a millionaire? Past athletes had to make their own way with minimal funding - but this current crop are sponging off the rest of us. Its payback time Olympic heroes!

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  • 13. At 5:54pm on 25 Jan 2009, danceposa wrote:

    i thought the job of editor was to edit and manage the department. Yet every time there is a big story YOU put your tuppence worth in. WHy dont you let these stories be covered by reporters. Are you so insecure in your ability to survive that you have to keep on popping up every time a big story breaks.
    It is the same every time. Liverpool takeover this time. Not so long ago you went to Beijing WHY? you did not add any gravitas to the Olympics coverage. Or was it as I suspect just a jolly for the editor!!!

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  • 14. At 09:35am on 29 Jan 2009, antiblazer wrote:

    As a parent of a potential competitor and a taxpayer I do fully understand the need for financial restraint during these times of mass unemployment and severe hardship inflicted upon so many families.

    My anger is not that my daughter has lost her funding but the way in which it as been done. Less than three months ago she was told by her head coach that her funding would be in place for 2009. On that assurance she committed herself to a further twelve month lease on her accommodation and passed up on full time employment to enable her to train full time as required. Her grant barely covered her accommodation, other expenses such as electric, food and clothing had to be made up by the family and various part time jobs.

    She is not on her own, at least six of her squad have now been placed in very difficult circumstances and forced into mounting debt. It is a disgraceful way to treat young dedicated athletes and a sad indictment upon UK Sport. From a Government perspective it is totally contrary to a policy of prudence during these desperate times, it smacks at entrapment and incompetence.

    It is highly unlikely that this Government will still be in power by 2012 and their cynicism is already showing, they simply do not give a dam. As with the Government, the chop should be made at the top, by pruning the Gravy Train "Blazers". Those at the top who are making the decisions without a care for our youngsters.

    My family are currently investigating the possibility of legal action to recover the cost of this debacle and the false promises made. I would therefor welcome any meaningful suggestions from fellow contributors.

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  • 15. At 2:08pm on 31 Jan 2009, MarktheHorn wrote:

    I suspect the Government have worked out that they need even more of our money just to get the Olympics ready on time...nevermind helping athletes win medals!

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