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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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