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London 2012 escapes big funding cuts - for now

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David Bond | 12:29 UK time, Monday, 24 May 2010

There will have been a collective sigh of relief over at London 2012 headquarters in Canary Wharf after the Treasury announced where the axe would fall in Chancellor George Osborne's £6.2bn of spending cuts.

In total, the Olympic Delivery Authority (ODA) - the body responsible for building the venues at the Olympic Park - will have to find only £27m of savings.

When compared to the £9.3bn cost of the project or the huge cuts being made to other government departments, it is a relatively insignificant sum.

Aerial view of Olympc ParkAerial view of Olympc Park. Photo: Getty Images

Ever since Jeremy Hunt, the new Secretary of State for the Department for Culture, Media and Sport, revealed the Olympics would not be immune from cuts, there have been concerns among London 2012 officials that the coalition government would raid the £600m of contingency that is forecast to be left over from the £2.7bn set aside for cost overruns.

Even though the ODA is firmly on track to come in under budget, the project enters its busiest and riskiest phase this summer, with building work at its peak in the next few weeks. To remove the cushion provided by the contingency would have left the ODA at the mercy of contractors and risked blowing the budget two years from now.

Instead, the chancellor has agreed a modest cut with the DCMS following talks that included the ODA over the last week or so.

Officials will not say where the savings will be made - and it will be for the ODA to identify areas to trim by the time the project's next quarterly statement is out in the summer. However, they point to the £600m of savings (this is on top of the contingency pot estimated to be left by 2012) the ODA has already found over the course of the project.

In truth, it would have been very hard to slash the ODA's budget when the project is so far down the road and with Britain's international reputation on the line in 2012.

In addition to the £27m cut to the ODA, the DCMS also has to find £61m of savings across the board - a cut of 3%. That cut will be passed on equally to all bodies that receive taxpayers' money from the department, including UK Sport - the organisation that funds Britain's Olympic athletes.

That amounts to a £1.7m reduction to UK Sport's annual budget, although officials say they will not have to take the money from the £100m-a-year funding for elite athletes preparing for the 2012 Games. Many, who know the feel-good factor that will be created by a successful home team in 2012, will welcome that.

But those involved in London 2012 would be wise not to view the announcement as a complete escape. The cuts only take us up to the end of next March. They know there could be more to come before the Olympic torch arrives in London.


  • Comment number 1.

    Given that it's going to take a few years to significantly reduce the budget deficit I don't think they should really cut the Olympic Budget any further for now. I understand that most of the building is going to be completed next year so they should have a good idea then of the overall spend and if the Olympics do come in under budget then that's great and unspent money can be given back to reduce the deficit.

    Surely they will have to have some contingency funds for the final year leading up to the games though to cover anything unforseen (that's what contingency budgets are for).

    Not surprised that the funding of Olympic athletes isn't part of the cuts either. The cynic in me feels that the politicians want their photo opportunities come 2012.

  • Comment number 2.

    Further cuts notwithstanding, the biggest short-term risk area is unrelated to construction of the Olympic site. The thing that will have the greatest single knock-on economic effect for UK Plc is a successful GB team. In fact, a successful home team is often a pre-requisite for the event being regarded as successful in the eyes of the rest of the world. On that basis, £100m for elite athletes is not enough. I hope any future cuts aren't short-sighted and that they don't affect our athletes. I'd sooner we built a 7/10 facility instead of a 10/10 world-class facility and the remainder of that money be devoted to building a sustainable pool of fantastic athletes.

  • Comment number 3.

    I think this cut is purely to express all things must be cut .. so more "sybmolic" than intent, and the coalition wouldn't be foolish enough to embarrass the whole country with another "austerity olympics like '48". Please? Fear removal of funds from our athletes though.

    The bulk of the state money has already been spent now anyway. Pehaps ask Fergie to help raise the rest?

  • Comment number 4.

    The Olympic venues are less than a year from completion. The show itself is funded from ticket sales, merchandise, Olympic sponsors (both domestic and IOC partners) and other private sources. The project is, I would have thought, too far along the line for anyone to be able to screw it up by now, even if they wanted to (which they don't). Believe you me, the government will be looking forward to basking in the afterglow (and quite possible bounce in the polls) of a successful Olympics. They won't put that at risk.

    The only aspect which is at risk, and this would be a huge breach of trust, is the legacy to the area afterwards. It would be a monumental failure if, after the world's eyes are long gone, the government doesn't properly see through the conversion of the park into legacy-mode.

  • Comment number 5.

    Im sure that sales of the new mascots will make up the short fall. They seem really popular......

  • Comment number 6.

    I know that was tongue in cheek but you're muddling up the two budgets Oz. The ODA budget is what has been cut by a small amount (the budget for the building work). The LOCOG budget, which merchanside sales (including mascots) go towards, does not have a shortfall and is not being cut.

  • Comment number 7.

    OZ - the mascots are very popular with kids who will no doubt pester their parents to buy related merchandise so no worries there.

    Doesn't really matter if lots of adults don't like them as they wouldn't have bought anything anyway.


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