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Real cost of 2012?

Just after London was awarded the 2012 Games, there was a nice letter to the Today programme asking if we could allot a couple of hours a week to negative whingeing about the Olympics, so that we could at least enjoy the honour of having the games the rest of the time.

I find myself agreeing with that sentiment, as I listen to the downbeat media commentary around.

The truth about the budget of the London Games is that it's nothing like as bad as it looks.

It is simply not correct to say the cost of the games has gone up "yet again".

It is not correct to say the costs of the games are "out of control".

It is not correct to say the cost of the games has quadrupled or tripled.

It is even incorrect to say the cost of ÂŁ9.3bn is the cost of the Olympics at all.

So what is correct?

(I apologise if the next few paragraphs have more figures than you really want, but I think it is important to make clear where the costs were, and where they are.)

The costs everyone talks about are those for building the facilities and re-developing the games site. This is said to have quadrupled from 2.4 billion to 9.3 billion.

However, the 2.4 billion figure is wrong, as is the 9.3 billion figure.

Always added to that original 2.4 billion was an extra billion pounds of spending on local regeneration. So the 2.4 should be counted as 3.4.

And that original budget of 3.4 billion has now risen to 7.5 billion, not 9.3.

The 9.3 includes stuff - like security, VAT and some extra bits - that were always accounted for separately from the 3.4 billion.

So in other words, the original 3.4 billion has in fact risen by 120%. Or, a good journalistic way of saying a cost has risen by 120% would be to say it has "more than doubled".

That might sound like costs are "out of control", but when you take into account that 2.7 billion of that 7.5 billion is a contingency for unforeseen costs, you realise that we can't say costs are out of control yet. We don't know whether they'll go out of control, we are simply making sure we can cope if they do.

It is true that the full cost of the construction and security and some other aspects of the games is ÂŁ9.3 bn, but that includes ÂŁ840m of VAT payments which goes back to the government, and hence should be disregarded.

However, the real problem with the casual use of phrases like "the cost of the Olympics" is that it overlooks an important fact: these big numbers are not the cost of the Olympics at all, but cost of constructing of a town in a desolate East London site of 2.5 square kilometres; a town which will be temporarily used by the 2012 games.

To disregard the value of the site at the end of the two weeks sports festival is to disregard the whole point of having the games in London at all. If I buy a ÂŁ100,000 house to host a party, I'd be a bit silly to say the party cost me ÂŁ100,000. Because I've got a house at the end of it.

The site will not be owned by the taxpayer. Developers will sell portions of the housing and the other facilities (the developers are spending several billion of their own on top of the 7.5 billion) but there should be some value to the taxpayer at the end of the process.

As it happens, the budget for running the games itself - the two week sports festival - is ÂŁ2bn. That has not changed and is not included in the 9.3 billion. No-one really talks about this two billion as it will be financed by private sponsorship.

I am sorry if all this accounting is a little tedious. I'm sure we will have plenty to complain about as the games progress to 2012. it would be surprising if we didn't, given that it's such a large project.

(And there are already aspects to moan about - the new security budget of ÂŁ600m in the 9.3 billion for example has risen from the original bid, and yet security was hardly an unforeseen need back in 2005.)

But let's not exaggerate how bad it is.

Comments   Post your comment

  • 1.
  • At 10:23 PM on 15 Mar 2007,
  • Alex Logan wrote:

Excellent article. It's so refreshing to hear something about London 2012 that's not blown out of proportion.

  • 2.
  • At 10:52 PM on 15 Mar 2007,
  • Neil wrote:

Ok, but let's have some sense of proportion on the thing itself. TWO BILLION QUID ON A FORTNIGHT OF SPORT? ARE WE CRAZY??

  • 3.
  • At 11:13 PM on 15 Mar 2007,
  • Peter Beardow wrote:

Evan,

Thanks for a well needed and reasoned analysis of the demand side of the Olympics budget and some of HMGs delightful circular budgeting ...

Perhaps you could do a complimentary supply side analysis, a lot of this money appears to be very real, in comparison to the "funny money" costs, the 2.2bn from the Lottery, the 38p week on my council tax, the extra 300m from GLA budget savings ....

Looks to me as if all this smoke and mirrors is to disguise a raid on the lottery and the London Taxpayer. This should be no surprise after all, with so many receipients unable to recliam it, VAT has always been the great hidden lottery tax.

Whilst on the running of the games, where does everyone think Lloyds TSB's 80m ultimately comes from....

Best regards

  • 4.
  • At 11:40 PM on 15 Mar 2007,
  • jack edmondson wrote:

What a fatuous article. No-one has any sense of shame when they quote such large figures of public expenditure without thinking of all the disadvantaged people or public infrastructure this could be spent on. Whatever number it is it has a billion after it. And that is far too much to waste on watching people run round a track or throw some sticks. Have some decency towards your fellow human beings.

  • 5.
  • At 12:05 AM on 16 Mar 2007,
  • SimonC wrote:

Well you *say* that these were never the "real" figures, but they were undoubtedly the ones that were repeatedly quoted to the public. If ÂŁ2.4bn was never the real cost as you say, then why was it bandied about with such gay abandon? Is it some how more palatable to accept that we were lied to two years ago than to accept that financial mismanagement has occurred? Personally, I find deliberate misrepresentation of costs to be worse, and it seems to me that misrepresentation is precisely what you describe.

It's all very well turning round and saying "well we always *knew* it would cost more"; why didn't anyone say so? (except everyone opposed to the bid, of course.) In what sort of weird world do cynics get initially pilloried for predicting costs will go up, only to have the very people who made the low estimates in the first place mendaciously claim "we told you so" when the cynics are proved right?

Cake is being both had, and eaten.

  • 6.
  • At 01:01 AM on 16 Mar 2007,
  • Adam Gordon wrote:

At least you hope you've still got a $100k house at the end of the party...

Mind you, per your last post, at the end of the party the house might be worth $101,950...

Mind you, if your house became famous as the one wot was purchased just for one party, the value could be $110,950...

  • 7.
  • At 01:02 AM on 16 Mar 2007,
  • Anthony wrote:

For goodness' sake Jack, a lot of it IS being spent on public infrastructure! And East London is one of the most disadvantaged areas. OK, you may argue that we should just spend the money on redeveloping the area - which would be a valid point, if you don't think sport has any value - but please don't pretend that there's no payback.

Good explanation.

I'm reminded of the Dilbert cartoon in which Dilbert gives a well reasoned explanation of his activities, and all the Pointy Haired Boss hears is 'blah blah blah', and then bawls Dilbert out for making excuses.

For 'Pointy Haired Boss' read 'taxpayer'.

The people of Britain will be deeply unhappy if they can't whine about a huge mismanaged white elephant. Don't take that away from them, Evan, they have so few pleasures.

  • 9.
  • At 05:35 AM on 16 Mar 2007,
  • Sean - Brisbane wrote:

I worked at the Sydney Olympics and lived there for 5 months in the build up. A day did not go by without media drumming up wide spread doom and gloom re: infrastructure, transport etc They even had their own satirical drama "the games" on the organising committee and it's decisions. Many Sydneysiders left for the duration of the games - to get out of the chaos. What happened was a magical month of sport and a city lit up with smiling happy people who embraced the Olympics whether as spectators, volunteers or just being a resident. Embracing this wonderful cultural event in their city - those who missed out regretted it. I also worked at Manchester 2002 - another great games - great legacy - I can't hear too many mancs complaining about their tax, but then they don't live in the rich south. Then there's sport - do we care about it - do we want to do well - of course we want to help motivate the next generation and try and put Britain back in the top five of sporting elite. Aim high. It's also about community - the olympic torch relay will get to Scotland, Ireland, Wales - go and see it it will put a smile on your face, there will be other community events - school children from all walks of life will be lucky enough to be involved. Sitting in the Manchester Athletes Village with Primary school kids from inner city Liverpool with there red and blue scalves singing a song to the athletes made everyone smile. And the legacy of regeneration with east London - having lived nr. Hackney - I can say it needs it. Britain is a western nation and London is a wealthy city - it can afford to put on a great games - and if you can convince a dour scot in gordon brown you can convince anyone - now stop the moaning and embrace the event in your truely great city - it is going to be awesome.

  • 10.
  • At 09:02 AM on 16 Mar 2007,
  • Robert Layton wrote:

Why don't we ask people to make voluntary contributions to fund the Olympics. Those who want it get to pay for it those that don't are spared the expense. Leave the poor taxpayer alone when it comes to these flights of egomania.

A few quick follow-up responses.

First, to Jack.. “no-one has any sense of shame when they quote such large figures..” I sympathise with that comment Jack.

A billion quid is a lot of money, and we shouldn’t throw it around like it is nothing. As Peter Lilley used to say when he was social security secretary.. “Everytime I’m told to cut a billion pounds, I have to remember that’s £20 a week, for a million households!” The cost of the games at £2billion or £10 billion is enormous. £10 billion is £170 for every man, woman and child in the country, (albeit spread out over six years.)

The real question though, is what value would we derive from alternative uses of the money? We could spend the money on an extra 20 trips to the cinema each – that makes the Olympics sound relatively cheap to me... but we could also re-build a lot of low quality housing estates too, which makes the Olympics sound rather trivial.

But then I just remind you, that you can’t disregard the value of the cleaned-up land at the end of it all.

And then to SimonC, I sympathise with your comment too.

The cost of the games was mis-represented during the bid. I agree that there was shocking dismissal of the claims of critics who were obviously right about what they said. And looking back on some old quotes in newspaper articles at the time, you do get a bit angry. (the 2.4 was said to include a huge contingency, and bid insiders were said top be privately confident they could be delivered more cheaply than that...)

But as it happens, on the day we won, the Financial Times which probably did a better journalistic job of pulling together the costs than most other people, quoted the costs at £4.9 billion – which was £2.4 plus 1 for infrastructure plus 1.5 for running costs.. I think the comparable figure today would be 11.3 – the 9.3 plus the 2 for running the games. (Again, the cost has more than doubled since the original estimate.)

But my general point is that the problem was in the unrealistic estimates back then, not in the loss of cost control now. Whether we should punish the bid team for spinning too far, or give the games back to IOC, or give knighthoods to the bid team for securing the games for London is a decision above my pay-grade.

Finally, one issue that does concern me is the ownership of the legacy assets. Several thousand houses and the land around them. I have found the ODA a bit vague about who owns what, and how much it will be worth.

But if they want to argue that building a legacy is what the purpose of all our spending is, they can’t afford to be too casual about who will get the proceeds when it is sold off in 2012.

  • 12.
  • At 10:00 AM on 16 Mar 2007,
  • Reg Wells wrote:

It’s nice to read something positive that puts the usual sensational media doom and gloom into context.

To Jack, I used to live in Hackney, so I know how bad that area of London is. Do you really think that the government would have spent anything like that amount of money in the area without the Olympics. Plus all the facilities and cheap housing will be available to the locals after the games. Rather this than they spend it on guns and bombs for the military.

  • 13.
  • At 10:00 AM on 16 Mar 2007,
  • Chris wrote:

Evan, the cost-benefit of the games may make more sense than what the public assumes, but this does not take into account who bears the cost, and who gets the benefit. As a Londoner I am expected to pay more tax, even if a regenerated local area in Stratford helps me no more than it would a Glaswegian, and I expect the exposure will have little effect on tourism (is there someone in the world who hasn't heard of London?). Yes, transport infrastructure might see some improvement, but by and large this is having a party to mask the fact that we're building the house, and appealing to national pride while picking the taxpayers pockets.

  • 14.
  • At 10:05 AM on 16 Mar 2007,
  • Ian Titherington wrote:

With respect to you Evan, the electorate were led to believe that the original cost was ÂŁ2.4 billion. There was no mention of 'other re-development costs.' In terms of the construction costs, they have gone up substantially in a few months, which puts into question the competence of the scheme managers when one considers the basic errors that they made to incur this cost (my opinion as a Civil Engineer).

The contingency is again a massive amount of money, if one assumes that the latest construction costs are supposed to be 'final.'

I too welcome the opportunity for some very poor parts of London to get much needed redevelopment. However, the sad irony is that other poor parts of the UK such as West Wales and the valleys will be paying towards much of this development, through huge cuts in future lottery funded schemes (ÂŁ30-35 million-Wales) and through their proportion of the required tax revenue (ÂŁ300 million-Wales). This is particularly problematical in Wales, where Objective One areas rely on additional matched funding from the Assembly budget, which is itself being squeezed at the same time by the annually reducing barnett formula.

I am not someone who sees London as one big moneypit and genuinely hope that the local communities in East London are the big winners. However, I would respectfully suggest that your opinions on the latest budget for the 2012 Olympics, are very much from the viewpoint of inside the M25. The view at the other end of the M4 is somewhat different.

  • 15.
  • At 10:25 AM on 16 Mar 2007,
  • Ian Kemmish wrote:

I can't get away from the fact that it was the Eeyores and not the Tiggers who were right about how much that big development just over the river from the site of the Games would be worth after the year 2000 was over and done with....

The management of the games so far - even down to the vocabulary used by those paid to get us "behind" them - indicates that there are a lot of Pointy Haired Bosses in the works. Experience suggests that in such circumstances, while a happy outcome is possible, in practice it's never going to happen.

  • 16.
  • At 10:25 AM on 16 Mar 2007,
  • Robert wrote:

The NHS is laying off medical staff at the moment due to a budget shortfall. This shortfall would be more than covered by the sums to be spent on the London Olympics and of course would benefit the nation as a whole.

  • 17.
  • At 10:31 AM on 16 Mar 2007,
  • Ismail Patel wrote:

Evan,

Good effort in trying to make the Olympic fiasco look better than it is. The fact remains... and it is a huge fact that the costs have doubled. OK.. they havent trebelled but they have doubled and when we are talking billlions... I still find it incompetent. You might think some of us are never pleased but when you look at the habitual inflation of projects in this country for example the Dome, Wembley etc mere plebs like me and joe public at large have a right to vent our frustration when its our hard earned money going into this.

I mean... If people are so concerned about regenerating East London, then why didnt they just do it rather than use the Olympics as an excuse. Im sure it would have been cheaper!

  • 18.
  • At 10:35 AM on 16 Mar 2007,
  • Steve German wrote:

To somehow imply that the regeneration spending on the East End is external to games spending is disingenuous to say the least since the 'legacy' argument was one of the prime reasons for winning the games in the first place.

Many places could benefit from the spending the East End will get - it will get it because of the games. This spending, therefore, is as a direct result of the games - neither the East End nor anywhere alse would have got the spending without the Olympics.

It is therefore 'games spending'.

  • 19.
  • At 10:39 AM on 16 Mar 2007,
  • Lounge Lizard wrote:

Seems like a jolly good wheeze by the Reubens brothers to get the public to pay for all their site infrastructure improvements such as transport, utilities, retail etc which they then hawk off to the highest bidder after the games at a fat profit, having returned absolutely nothing to the taxpayer or the local community.

A ÂŁ2.7bn contingency fund smacks of panic about costs. Most contingencies are about 5-10%. This is closer to 30% which tells me that costs are nowhere near fixed and the costing process has been a joke from start to finish so far.

  • 20.
  • At 10:40 AM on 16 Mar 2007,
  • Rob A wrote:

Many thanks Evan for an informative article which confirms my suspicions that some of the recent headlines were sensationalist, shoddy journalism.

In any case, what the olympics will bring this country is well worth the money in my humble opinion! I for one can't wait for 2012!

  • 21.
  • At 10:48 AM on 16 Mar 2007,
  • Steve Wheeler wrote:

I am becoming increasingly baffled by this tendency for journalists to apologise to their audience for covering stories that require a basic understanding of science or maths. Whether it's Gavin Esler telling his eminent invited guests to go easy on the details about global warming because "I'm not a scientist," or Krishnan Guru-Murthy on C4 telling his interviewee that he's "getting a bit technical," the competition to make news accessible to all is in danger of making it meaningless to any.

With all due respect to Evan, who obviously specialises in trying to make economics understandable, this is an economics article about contested numbers in a financial context. To apologise - twice - for citing some figures seems to anticipate such an extraordinary lack of numeracy amongst potential readers as to make the whole article pointless.

Surely we the readers can be trusted to know whether we "find all this accounting tedious" and decide to read the article or not accordingly. It's all a bit reminiscent of that scene in The Simpsons, when Professor Frink draws a square on the wall and says "Now, this is a simple square," and Chief Wiggum interrupts to say "Whoa! Whoa! Slow down, egghead."

  • 22.
  • At 10:51 AM on 16 Mar 2007,
  • Ben wrote:

It is a complete farce... before the bid was won, I was amongst many who looked at the quoted figures and said-they are wrong. The Olympic bid team told the public it would ONLY cost 3billion, full price, no extras, all in and there would be no increase!

This was a complete and utter lie, we should be having a public enquiry, people SHOULD be going to jail over this but they won't.
Its well known that Shanghia are spending $25billion... in a country
with cheap labour and no H&S rules...
How on earth can we do it for less 4 years later than them?

The London Olympics won't cost 9 billion- the end cost in 2012 will between 15-30 Billion pounds. That I promise you.

Lord Coe, Red Ken and Tessa Jowel should be answerable for this crime, dragging the poor country further into debt for a couple of pointless weeks of sport we can ill-afford and don't want.

Already living and working in the Olympic area is a nightmare, the mess on the roads has cost me a couple of new tyres already and the businessews moving will undoubtable cost my company dear.

Even if it cost ÂŁ100million it would be a waste, we should stop now and save the cash, we don't need the Olympics and they don't need us- cancel it now before its too late!

  • 23.
  • At 10:52 AM on 16 Mar 2007,
  • Bob Gordon wrote:

Can anyone tell me how the Olympics in London will benefit the North of Scotland and other areas of the UK which are completely ignored by the government but will still end up paying or losing out through diverted lottery cash?
Does the government want us all to have to migrate to London as there will be no jobs anywhere else in the country if the everthing continues to be South East of England orientated.
It is even worse to see Gordon Brown supporting an English World Cup bid in an attempt not to be discriminated against because of his country of birth. Would the establishment be willing to moan about him becoming prime minister if his skin colour was what was different about him?

  • 24.
  • At 10:54 AM on 16 Mar 2007,
  • MrCruet wrote:

I wish to querry some of your reasoning.

You say that we should not discount the value of the property being created and give the example of a house. This is true.

However you then say that at the end of it - we (the tax payer) will not own it. It will be owned by private companys who will sell it and make lots and lots of money. They may have invested there own money in the project but even according to your own figures they've not invested the bulk of it so why do they end up owning it.

A much better example then your house example would be "Buy a tent for a ÂŁ100,000 which is then the property of the caters who can do what they want with it."

And that is madness....

  • 25.
  • At 10:58 AM on 16 Mar 2007,
  • Mark H wrote:

Ian Titherington is correct. Many people are angry about the games because of the money it takes away from the rest of the country.

London always gets vast amounts of money spent on it at the expense of the rest of the country. For example, public transport projects in my native Manchester, not to mention other cities around the north, have time and again been abandoned and then spent on public transport projects inside the M25.

We see it happen over and over in all areas of life - sure, London has some deprived areas that need regeneration, but if a fraction of the redevelopment money were spent in - for example - certain large, deprived, Lancashire or Merseyside towns - the difference it made would be incredible.

  • 26.
  • At 11:02 AM on 16 Mar 2007,
  • John Galpin wrote:

Why is anyone surprised? Name one sizeable infrastructure, defence or IT project that has been run or overseen by this government that hasn't been overbudget, late and usually not up to standard.
This week an article in The Times identified large number of roads projects were shown to be late and overcost. How many billions is the NHS IT project over cost with no sign of delivery and little chance of meeting its objectives. The Scottish parliament building? the CSA? Aircraft carriers, heavy artillery, defence aircraft all late and overbudget.

Its not just that its the Olympics, this government have demonstrated a cynical incompetence with the taxpayers money and all Tessa Jowell could do in parliament yeterday was scream at anyone who queried her planning skills was "Oh you would rather Paris one would you". Its not that I don't want the olympics but I certainly don't want that kind of hubris and refusal to take responsibility.

  • 27.
  • At 11:02 AM on 16 Mar 2007,
  • George Wheatman wrote:

What a typically 'Parochial' view shown on this subject and its funding. Surely it cannot be right to expect the rest of the country to bear the costs of what is after all a 'Prestigious' event for London. There are many other Urban areas outside London which could benefit from expenditure of far lesser sums to improve their infrastructure and environs, and give a vast improvement in the quality of life over a longer period of time for the inhabitants, than the period of the Games. Or is it simply a case of these people don't matter. If the land is to be disposed of for 'Development' after the Games, then surely the costs of improved Infrastructure development should be reimbursed to the British people by those faceless developers who stand to gain most from the increased value that comes with a much improved infrastructure within East London. We the disenfranchised people of Great Britain are losing out once again to the desires of the wealthiest region of Great Britain.
How is it that the Government have so much political control over how the funding available, gained from the monetary input of the people of Great Britain, that being the proceeds from the 'Peoples Lottery', I suggest that there be a break away from the rest of GB Lottery funding by operating a specific 'Inside M25 Lottery' to pay for this event, and let the London people decide how much political control the Government have over such funds. Meanwhile, the rest of Great Britain be allowed to continue to hold the 'Peoples Lottery' and decide on which good causes should receive the benefits, according to need.
Once again the provinces lose out to the self agrandisement of London, let them who gain most from such events, pay for them without burdening the rest of the Great British citizenry, who pay the most but stand to gain the least.

  • 28.
  • At 11:07 AM on 16 Mar 2007,
  • Dan, Watford wrote:

I can't help but view the Olympic costs in the same light as the "Glorious" Wembley Stadium, it starts off as costing "Figure A" and ends up costing "Figure Z" and very very late.

The Olympics have been a white Elephant to most nations that have been "lucky enough" to host it, and the over taxed electorate just can't afford to take on this burden for a few weeks. Why is it we can find the money for this but have a useless over indebted NHS and an already huge tax burden from this inept Labour government.

I'm telling you now, we won't even break even on this project.

  • 29.
  • At 11:11 AM on 16 Mar 2007,
  • CallumW wrote:

I disagree with the ÂŁ840m that should be diregarded as this goes back to the government.

The taxpayer is helping pay for the full ÂŁ9.3bn of which the government is skimming the VAT off the top like a fat ca skimming the cream from the milk.

Perversely, the more it costs us, the more the government can pocket through VAT

  • 30.
  • At 11:20 AM on 16 Mar 2007,
  • Johnny Lyttle wrote:

Excellent article, thank you for giving us an insight into this story that we wouldn't otherwise see through the media.

The only thing that concerns me is this "unforeseen costs" budget. Surely there was one of these built into the original budget of 3.4 million. Now that unforeseen costs HAVE arisen, instead of using the unforeseen costs budget, the ENTIRE budget has risen, with an increased "unforeseen costs" budget included! Doesn't that defeat the purpose!

Now there is a 2.7million unforeseen costs budget. If 2.7 million pounds worth of unforeseen costs arise, will that money be used, or will the whole budget be raised again, with a 5 million unforeseen costs budget included!

Excellent article Evan which did a lot to clear up the confusion - however if you're the BBC's Economics Editor why don't you have any influence over the people who write the tabloid-style headlines which have featured on both BBC TV and Radio in the last few days? Isn't it time you brought all these ill-informed idiots together and made it clear that they mustn't run badly researched sensationalist news items without checking them with yourself first??

  • 32.
  • At 11:21 AM on 16 Mar 2007,
  • Nigel wrote:

Absolute rubbish! By the time we get the final accounts some time after 2012 I will guarantee that that bill will make even the latest 'all in' quote of 9 billion look like pocket money. It would not surprise me if the total cost was upwards of 20 billion. Massage the figures however you like, but it's still going to cost the taxpayer an absolute fortune.

As an aside, can we even be sure it'll all be finished by 2012. Wembley anyone!

  • 33.
  • At 11:29 AM on 16 Mar 2007,
  • Lossaversion wrote:

Mr Davies I admire your attempt to provide some much needed clarity on this issue.

As you are an Economist I also commend your attempt at a cost benefit analysis ie the cost of the 2012 Olympics will produce benefits ie new infrastructure, jobs regenration etc

However your Economist training should focus on how the Olympics will be funded and to what extent these impose economic costs including the foregone benefits to resource this global PR event; and whether there are any perverse or unintended consequences on the horizon.

The key issues to my mind are as follows -

1. The setting of an appropriate budget that can deliver the quality of outcomes being desired - in my view there is little to inspire confidence.

2. The budget is well managed and controlled - here again unconvinced that it will be

3. Where is the cash coming from and how will any shortfalls be met - the public sector is not at its best when it negotiates with private sector providers (see PFI as an example e.g STEPS). Being the lowest cost borrower why did the Govt not just issue ÂŁ10-15 bln of Gilts (the market certainly needs the supply) backed by revenues generated from the Olympics and the benefits from the regernation etc?

4. What is the potential for the public and the public purse being exploited by Government to realise this event?

I am in favour of the Games and to put on a great event of the quality expected is unlikely to be cheap.

However this does mean that every attempt should be made to ensure that appropriate controls are in place to minimise exploitation of the public purse - more important should things go wrong who will be held to account and make good - I hope it is not the public purse (which often does in PFI deals)

My greatest fear is not that the Games will be late that the process used to deliver them on time may impose greater financial and non-financial burdens on the UK than is necessary. Given how this Governemnt has fared in the key concerns of our time e.g NHS, Education, transport etc I remain unconvinced that UK will not come out of this unscathed.

  • 34.
  • At 11:31 AM on 16 Mar 2007,
  • Bananas_the_monkey wrote:

Evan is quite right in his reponse.

If questions of public expenditure were always framed by the 'bread or circuses' dilemma then we'd never get any circuses.

I'm all for fiscal responsibility and accountability but there comes a point when we all need to lighten up a bit and get a sense of perspective.

  • 35.
  • At 11:37 AM on 16 Mar 2007,
  • Ray Gerlach wrote:

Excellent article. I am also a little surprised that nobody has looked at the cost of other regeneration schemes across the country in recent years and compared them with the regeneration costs around this site in East London. For example the cost of regenerating the North East of England or South Wales or of Docklands . Were these not also funded in large amounts from the public purse/European funding programmes ?

  • 36.
  • At 11:38 AM on 16 Mar 2007,
  • Steve Brereton wrote:

After reading all the miserable comments on the HYS pages, and hearing the howls of derision in the Commons, its nice to be able to get a handle on the real costs.

The one thing I find really disgraceful about all this is that the Treasury is demanding VAT be paid on the costs, especially since the bills will be met from monies already collected from taxes in part.

  • 37.
  • At 11:41 AM on 16 Mar 2007,
  • Gary Lake wrote:

The 9.3 includes stuff - like security, VAT and some extra bits - that were always accounted for separately from the 3.4 billion.

I'm sure it said on the news last night that organisers forgot to factor in the VAT..?

Are the games costing so much because the people planning it are doing it so ineptly?

  • 38.
  • At 11:43 AM on 16 Mar 2007,
  • peter kim wrote:

My forecast as to the final cost of 2012 including the kitchen sink is ÂŁ12 billion. Please make a note of this because I like to know I am right.

  • 39.
  • At 11:47 AM on 16 Mar 2007,
  • Bob wrote:

I have two questions for you Evan:

I) Who actually put together the bid document finances – was it Government officials (who I guess don’t know much about building projects of this size) or was it private accountants or consultants – if it was someone outside Government could the Government not sue them for negligence?

II) Is it true that all the VAT payments go directly back to the Government? If so why didn’t the Government just waive the VAT payments – or are there EU international rules on VAT that prevented the Government from doing this?

  • 40.
  • At 11:50 AM on 16 Mar 2007,
  • Stuart Marshall wrote:

2.7 out of 7.5 as contingency suggests that the costings are no where near accurate enough. Normal building projects would have 5-15% contingency rather than 30%. This suggests that there are significant unkowns in estimating the costs..not yet out of control but indicates its not actually well understood.

  • 41.
  • At 11:56 AM on 16 Mar 2007,
  • Murray wrote:

An interesting article and pleasing to see Evan Davis follow it up with further comments.
That said, I do rather think the Olypics in London are huge waste of public money. Yet another case of public cost and private gain. Who pays? the nations taxpayers, lottery ticket buyers and London council taxpayers?. Who benefits ? the construction companies, BIG TIME !!!, along with an army of consultants, architects, planners,Olympic committee members, advertising agencies etc. Yes those construction companies will employ some local people but they quite probably employ far more Polish people than local East Londoners.
VERY LITTLE benefit will accrue to to poor and renting people of East London (if the area takes off as the property people no dobt would like, local rent will rise making poor renter worse off). And except for a tiny elite there will be little benefit to UK sport as a whole.
Yes sport should be encouraged but this is an very expensive and inefficient way of doing it.

  • 42.
  • At 12:00 PM on 16 Mar 2007,
  • Chandra wrote:

To quote from your last line, "But let's not exaggerate how bad it is" - there's no need to do that, it's more than bad enough.

The initial figure was incorrect, but sold to the public to make them think it would not cost too much: in fact, Londoners are losing out because in the east end they'll be priced out of their own area and the rest of us here will pay more council tax; non-Londoners will see their area's Lottery funds reduced; in fact, the only people who look to gain are the Govt skimming off ÂŁ840m VAT and whoever gets ownership of the property at the end of it all.

Surely that issue, of who the developers are who will sell the land, what their own contribution was (yes, in figures, we're grown up enough to quite like those), and most importantly how they became eligible to asset-strip a publicly funded redevelopment, is where your fine journalistic focus should be, not on telling the rest of us not to complain about what can charitably be called misrepresentations?

  • 43.
  • At 12:02 PM on 16 Mar 2007,
  • Simon wrote:

Just a quick question regarding several comments made about "all the cheap housing" that will be available for 'ordinary folk to purchase' after the games. How will this be administered? How will anyone prevent property developers, or wealthy individuals from within and outside of the UK simply buying up large chunks of the so called affordable housing and then selling it on, or renting it out? As I recall the government's latest attempt at affordable housing was advertised as ÂŁ60,000, but went on sale for ÂŁ175,000 - hardly affordable for people on low incomes.

  • 44.
  • At 12:04 PM on 16 Mar 2007,
  • Saiful Alom wrote:

Its nice to hear someone speak some sense about the cost of the olympics. The media have gone crazy regarding the cost. How can something as complex as staging the games be understood by everyone.

I think people are blowing things out of proportion. Things like hosting the Olympics cost money. In this case however there are going to be a lot of benefits for the country. We don't have good sporting facilities and this will create some. This has been a common complaint of our top athletes who have to train abroad due to the lack of facilities - swimming is one area where we have a problem.

I'm from Newham and I think it would be great for the area to be regenerated. This will provide lots of jobs that are going to continue beyond the games. Yes the process is going to be painful but I see more advantages then disadvantages.

Where are we going to the extra money? Well don't spend any more cash on the Trident program, pull troops out of Iraq. That should save us more dough.

  • 45.
  • At 12:08 PM on 16 Mar 2007,
  • Mark wrote:

Why with such people as Evan in the newsroom are we treated to such nonsense reporting from the BBC over the last few days?

  • 46.
  • At 12:12 PM on 16 Mar 2007,
  • M Bates wrote:

A very informative article, thank you - it's nice to see something written about the games without the usual cynicism and scaremongering from the why oh why oh why moaners with not much better to do with their lives.

I get annoyed by comments where people say why can't the money be spent on the NHS - the NHS gets enough money as it is - it's just poorly managed, and pouring yet more money into it will not make any difference.

I think that the games are a worthy and affordable investment for a country as wealthy as ours - 9,10 or even 20 billion pounds over a few years for our Trillion pound a year economy isn't really that much.

  • 47.
  • At 12:14 PM on 16 Mar 2007,
  • Ian C wrote:

I simply can't understand the negative posts from other cities in the United Kingdom. The idea that the Olympics represents a draining of funding from the provinces into the Capital is a complete nonsense. Rather London and the south east send huge amounts of tax receipts to the north, Scotland and other less well off regions of the UK. If anything the investment in Olympic infrastructure is a timely concentration of funding in the Capital. Vast benefits, the regeneration of currently blighted swathe of east London, the upgrade to transport and the somewhat intangible benefits of London's increased visability and publicity, are the harvest to reap.

In addition the funding is to be sourced largely from the lottery (which one can choose whether or not to participate in), private sector sponsorship and London tax payers. Where exactly is the cost to the provinces? And where exactly were the much-vaunted Commonwealth Games in 2002.

Why on earth are people so keen to moan in such annoyingly small minded ways? The Olympics in London will be a great reminder of a city that is this country's chief asset.

  • 48.
  • At 12:14 PM on 16 Mar 2007,
  • Sam wrote:

I am astounded by the level of bias in this article even by BBC standards.

Evan you are obviously all for the olympics then?

Well thats doesn't surprise me seeing as your a BBC reporter who probably lives and works in London.

Well tell me this. I live in the city of Worcester how exactly does the olympics with its 9 billion pound price tag benefit me?

By my taxes increasing? The shortfall in my local public services like my bins only being collected every two weeks perhaps?

The only way the oylmpics effect me is by my money being wasted on the privilledged few living in london and the fact for around month there will be nothing worth watching on the television.

This is not whinging. That phrase suggests my complaints are ill founded and i am complaining about some minor inconvenience. This is a waste of my money that is as usual being spent on a elite minority living in London.

This is reminiscent of the millenium dome or the millenium wheel. A totally pointless waste of money spent by people who think there is no England outside of london.

Well i'm here to tell you there is a England outside of London and Birmingham is at its heart.

What i don't get is, you write tripe like that and yet still maintain the BBC is impartial? Do you ever actually read back what you say?

  • 49.
  • At 12:19 PM on 16 Mar 2007,
  • Tim wrote:

Jeez there are some cry babies around. I really liked this ariticle as it showed what the true cost might actually be. And ok, 2 bill is an unimaginable amount of money but 1)If it were to be spent on the NHS, or the roads or whatever it would most likely be wasted. Labour has continued to rachet up the spending in these areas with marginal results. 2) It works out at some thing like 50 quid each, money that we would blow without thinking on a few beers or a meal and the benifits we will get from the redevelopment of London, plus the honour of holding the games in this country way outways any costs. The press are sensationalists and know that it is much easier up until the time when the games start to run down the project. That will sell some more copy just as more papers will fly out of the window when the games are about to start and they will finally (barring any major cock up) get behind it.
As for the dismay of some commenters to the fact that politicians may have carressed the figures or even lied to sucka the public in before we got the games, wake up! This happens everyday and again the pesky press are as much to blame as the politicians because when someone speaks candidly they get torn to shreds. So instead we get lies or half truths and lots of 'best case senereos'. If every word were treated on its merits rather than by what sensationalist meaning the papers need to put on it to sell we might start getting some sense from our leadings. Until then, everything they say has to be taken with a pinch of salt

  • 50.
  • At 12:27 PM on 16 Mar 2007,
  • keith wrote:

Good article Evan, but I see two problems with the "legacy value" argument.

Transport - how valuable to the country will yet more routes to Stratford be - it's already served by tube, Rail and DLR - once the games are over?

Housing - the sheer number of houses going on the market after the games will surely cause an over-supply, reducing their supposed value.

  • 51.
  • At 12:29 PM on 16 Mar 2007,
  • George Wheatman wrote:

Just another thought, How much is our countries involvement in 'Illegal Wars' costing our nation. I am solely thinking moneywise here, not the unfortunate and avoidable loss of human life, both of our own citizens, and those of the countries we have illegally invaded, and continue to illegally occupy. More than enough to fund the entire Olympic Games, including all of the forthcoming cost overruns.? Perhaps. If our political masters gave more thought to the needs of Our nation, including hosting such prestigious events, than they are trying to create a name and reputation for themselves in the future history books, our once great nation would be a far better place to live.

  • 52.
  • At 12:31 PM on 16 Mar 2007,
  • Andrew wrote:

Regardless as to the worth of the olympic games (I, for one, still think the Millenium dome was a waste) I do think that there has been bad management with the Games.

If I had bid/managed a project that had risen in cost by 'only' 120% I would expect my competence to be questioned. This is not a high tech project, it's about buildings and transport. Just because it is about billions of pounds rather than thousands doesn't mean it's to be expected.
Yes it is a big complicated project, but can you give an example of one big government project that has come in at the original budget (or less!)?
We should be able to calculate a 'wishful thinking' factor that we can multiply estimates by in future

  • 53.
  • At 12:34 PM on 16 Mar 2007,
  • Mark King wrote:

I remember the nation 'jumping for joy' when the Games were awarded to London. The media also jumped for joy as they knew there'd be 8 years work ahead for them to 'slate & berate' anything they could possibly get away with.
This event is an opportunity for this nation to rediscover it's identity. Instead of the overwhelming sense of negativity that is spouted from the press, the Games should provide a sense of unity and pride amongst us all; not just Londoners.

If we all, including the Press, approached this event with positivity, instead of moaning, we would all be richer for the experience.

  • 54.
  • At 12:35 PM on 16 Mar 2007,
  • Robert Woodward wrote:

Thanks for explaining the figures and how we appear to have been shortchanged with the actual numbers up till now.

Looking at news24 last night when the cost change was being reported. The headline was the figure had trebled, the calculation from 2.375 billion to 9.4 billion meant the figure had almost quadrupled. Only later did this appear in the rolling ticker along the bottom of the screen.

Journalist usage of more than and nearly is always so vague. In journalistic terms 100000 is more than 10000 and nearly 1000000. All different by a factor of ten.

  • 55.
  • At 12:44 PM on 16 Mar 2007,
  • Andrew wrote:

Evan,
Do they explain whether this 'contingency' has identifiable risks associated with it? These could be like price of housing going up more than expected or delays due to weather conditions.

Or is it as I suspect that this is just a big pot of money to cover 'unforeseen circumstances' which is a byword for 'we don't know what we are doing'?

PS It would be interesting to see what proportion of the population would give ÂŁ140 to get the Olympic games into Britain. particularly when compared to the stated opening estimate of ÂŁ35

  • 56.
  • At 12:53 PM on 16 Mar 2007,
  • Paul wrote:

Commenting on Ben's post. I worry the citizens of Shanghai are going to be disappointed when after spending $25 Million they find the Olympics are in Beijing.

Before any Olympics, World Cup etc. the stories are always the same. Athens over-run, will it be ready etc.... Greek Tragedy.....After the Olympics we get the feelgood of Barcelona and of Sydney or in the case of the world cup the remarkable victory for the people of Germany in their magnificently staged event.

Britain is the fifth biggest economy in the world, let us have something to make us proud. The biggest worry I can see would be trying to skimp on the games and ending up with a nightmare like Atlanta....Let us build something of which we can be rightly proud...and look forward to 2012.

  • 57.
  • At 12:57 PM on 16 Mar 2007,
  • Darren wrote:

Straight to the point and cutting through all the media hysteria as usual Evan!

  • 58.
  • At 12:59 PM on 16 Mar 2007,
  • SimonC wrote:

Hi Evan; thanks for the response. Wasn't expecting one. :-)

I guess my exasperation comes from a sense of history repeating itself in magnificent style. First the apparent budget balloons, as it has done for pretty much every Olympics in the modern era; well, it's done now, as you say. Now come the claims of incidental benefits from the Games. Again, look around the world and you see Olympic cities littered with boondoggles constructed at vast expense and now languishing unused. The urban poor, it turns out, have little use for Olympic-standard velodromes.

And while it's undoubtedly the case that a specific area of London will indeed benefit to some extent, it's hard to argue that the needs of the largest sporting event in the world tally particularly well with a city's regeneration needs. We'll undoubtedly end up with a bit of London that's nice and shiny where it used to be skanky, but who's to say that this will in fact benefit those it's touted to help? Is it really going to create an area of decent, affordable housing, or is it going to simply become another area which low-income families are priced out of, without ever providing the influx of jobs and sense of community that helps people genuinely improve their circumstances?

Add to this the likelihood of problems in construction, further budget overruns etc., and it seems possible that development in the rest of London could be stunted, and our transport infrastructure massively disrupted in the dash to get our stadia polished. If we want to spend ÂŁ10bn of public money on improving the city for underprivileged communities, we should do so directly. We shouldn't use them as a fig leaf and hope that the Olympics' needs happen to match our claims.

To take your house analogy, this is more like spending ÂŁ100k building a nightclub for one night, then hoping that it turns out to have a kitchen and some bedrooms. The kids'll love the 500W sound system, but will you?

(Lest I sound too curmudgeonly, I am looking forward to the Games now we've got them, by the way...)

  • 59.
  • At 01:00 PM on 16 Mar 2007,
  • T.A.Jones wrote:

Applying the principles "Qui Bono?" (and who pays?) plus "The one thing we learn from history is that people don't learn from history".

With respect to jobs, how many, and what quality of permenant jobs will result, compared to those provided by the existing businesses which were forced out of the area? - Example to be learned from, the Emirates Stadium.

As for the temporary jobs, there is already a shortage of skilled workers in building & construction - So for the duration of the project that pushes up the costs of other construction works and building new homes.

(And may well require using temporary workers from the new EU countries, a significant proportion of whom are going to remit home any earnings above their living costs, not spending them in the UK).

Transport - Exemplar the Dome & Jubilee Line Extension - Yes we got the additional transport link, but it appears that (1) It cost over the odds in overtime & buying off threatened industrial action to get it completed by the deadline; (2) A lot of that money came at the cost of other works on the tube system who's functional priority and need was overridden by the Dome's political "need".

"Legacy" - Sure, that area needs affordable housing - But (1) Why not be honest and fund it from local and general taxation? and (2) (Emirates again) there doesn't seem to be any enforceable mechanism to make sure that the promised numbers of homes are delivered, or are affordable.

Sure you get an excellent sports centre - but one which is outside a convenient or regularly affordable journey for many Londoners, let alone people in the rest of the UK. Ordinary people need local facilities (and affordable ones, not high priced gyms).

If the proponents really believe that it will pay it's way, then why not issue "Olympic Bonds"? If they don't, but still believe that it has popular support, then solicit contributions, and have a ring-fenced "Olympic Lottery" ticket.

The fact that such options haven't been adopted is strongly suggestive that they can't genuinely believe the claims which they are trying to "sell" (and impose) on the public.

  • 60.
  • At 01:09 PM on 16 Mar 2007,
  • Paul Reid wrote:

Alex Logan is right. This is a sensible analysis of the Olympics' costs. And I for one think our having the games is wonderful. We should be happy to pay the bill and get on with showing the rest of the planet how well we can "DO" the games.

  • 61.
  • At 01:15 PM on 16 Mar 2007,
  • Martin Shipley wrote:

What for me gets overlooked, or is said as if it's nothing out of the ordinary, is that these games are costing BILLIONS. Whether the taxpayer has to fund ÂŁ2.3 billion or 9.3 billion it's still a hell of a lot of money. I agree that the urban regeneration is very worthwhile but given all the other uses these billions, not mere millions, could be used for I have to say, despite being an athletics fan, that the cost of the games is ridiculous.

  • 62.
  • At 01:26 PM on 16 Mar 2007,
  • Alan wrote:

I'd like clarification on where the extra money will be coming from. Is it from the Lottery and if so are other deserving causes throughout the country going to suffer as a result?

Money is needed now across the country to allow children and young adults the opportunity to participate in sport and to help combat childhood obesity, anti social behaviour and the current lack of basic facilities (grass pitches for instance).

Government needs to ensure community use is made of existing facilities in schools and where more is needed, provision is increased accordingly before there is no land left. I want to see my own children have better opportunities to participate in sport.

Bring the Olympics, yes. But not at the expense of the majority. Get kids involved now rather than hoping they will be attracted in 5 years time when some athlete makes an Olympic final only to come in 7th!

  • 63.
  • At 01:32 PM on 16 Mar 2007,
  • Mark Fitz wrote:

Evan, you have that rare quality of calmness and conciseness in putting forward your extremely comforting arguments - it does in reality get somewhat tiresome to have to endure shrill harping by the other more sensationalist elements of the "media" in their desperate attempt to blow such stories out of proportion. Why are facts so unfaashionable these days?

  • 64.
  • At 01:35 PM on 16 Mar 2007,
  • Bill Garnsey wrote:

1) The Games are a great event and to get the best from them we should keep positive. We are now committed to spend on the games, and clearly should invest in infrastructure and our athletes.
2) The games are going to happen they are going to cost more than we are currently being told. No event or project, as far as I can remember, comes in under budget.

The key question remaining is why did the government tell us it was going to be ÂŁ2 - ÂŁ3 Billion when they should have known it would cost a much larger amount.

I suspect cock-up rather than conspiracy. Probably signed it off without reading it.


  • 65.
  • At 01:39 PM on 16 Mar 2007,
  • Joey wrote:

I think what really bugs people is the fact that no matter how much the final amount actually comes to, anything that comes from the games isn't going to equate to the cost of hosting them.

It is a sad thing that people in power can make decisions to spend so much money just because that money doesn't come out of their pockets, it comes out of the pockets of the 60 million people they're supposedly representing.

NHS - Crying out for more funding

Civil service - Still in need of funding

Education sector - Still in need of funding.

-

And yes, I *KNOW* ÂŁ9bn isn't a huge amount to throw at any of the above, the difference it made would be small at most. But that doesn't justify throwing it at something that will be forgot about in a lot less time than people probably think.

  • 66.
  • At 01:42 PM on 16 Mar 2007,
  • Shugmeister wrote:

Evan,
Thanks for clearing this up, the budget hasn't trebled it's only doubled...that's okay then.
Perhaps we could apply the same situation to the NHS budget, then their 2% overspend could be lost with the VAT, as you so elequantly put it "but that includes ÂŁ840m of VAT payments which goes back to the government, and hence should be disregarded."

  • 67.
  • At 01:48 PM on 16 Mar 2007,
  • Nicky wrote:

It's all very well ranting about the huge costs of building the Olympic Park, but much of the regeneration was already happening (eventually) in conjunction with the Eurostar/Statford International rail terminal and general redevelopment that was taking place in the Startford/Leyton/Hackney area (it had been under 'discussion' for more y ears than most people care to remember). In fact when the plans for Stratford City were put on show to the public, after the Olympic bid had been grafted on, the Olympic stuff was plonked in the Lower Lea valley and not part of most of the regeneration plans. To add this into the costs of the Olympics is misleading and scaremongering on behalf of the media - or some huge tax fiddle by someone else!

  • 68.
  • At 01:52 PM on 16 Mar 2007,
  • Al W wrote:

To answer Ian Titherington and Mark H, bitterness about London getting all the money whilst other areas get nothign is a little misguided. What about the money spent on the Commonwealth Games? And the Manchester tram system? And the massive ongoing regeneration in Liverpool? Examples in Belfast, Newcastle, Sheffield and other cities could also be cited.
Besides which, when there are 7million people in Greater London and several million others within, say, a 30min train ride from the capital, why shouldn't the Games be based there or the lions' share of public expenditure be invested there? Whilst recognising that many areas outside the south-east require help, that is not to say they need proportionately more help than London, which is what the two aforementioned gents appear to advocate. Per head of population, the supposed unfairness of the system is exposed as a myth. Anyway, I don't hear the Yorkshireman at the head of the Olympic bid complaining, or the Scot holding the purse-strings...

  • 69.
  • At 01:57 PM on 16 Mar 2007,
  • Simon Brown wrote:

"The site will not be owned by the taxpayer."

"...but there should be some value to the taxpayer at the end of the process." (my bold)

Well that's reassuring. How about you give me ÂŁ100,000 (plus say 20% contingency because I'm not very good at budgeting) - I'll build you a house and you can have your little party. Afterwards I get to keep the house. Sound like a good deal?

  • 70.
  • At 01:58 PM on 16 Mar 2007,
  • Robert Stewart wrote:

We can juggle the figures any way we like, but the fact remains that hosting sports events is bad business. The people of Sidney and Athens can attest to that. Are these cities any the richer today for having hosted the Olympics? The winners in these situations are the organizations like the IOC and FIFA. They invest very little and then clean up on ticket sales and television contracts. Politicians may find it easy to spend public money on these things, but I doubt whether their own private investment portfolios include sports events.

The point that the real estate development will still be of use afterwards is valid, but do we really have to host the Olympics in order to develop land?

  • 71.
  • At 02:06 PM on 16 Mar 2007,
  • Henk Van Vleck wrote:

Wait a minute...

The ÂŁ2.7bn "unforeseen" contingency costs weren't included in the original estimate. That's nearly 80% of the total (original) budget.

Did someone just smack their forehead and cry "roofs! - we forgot to budget for roofs on the buildings...I knew there was something!"

  • 72.
  • At 02:11 PM on 16 Mar 2007,
  • Peter Kay wrote:

Sophistry. 120% increase denotes a project out of control no matter how much you spin it. The fact there is a 2.7bn 'contingency' fund clearly illustrates the project is not being properly managed and cost controlled.

I don't see a lot of socially responsible projects being spurred by the Olympics - land being sold off to large landowners with a very small percentage of 'affordable' housing does not count..

It would be far more effective to spend the money on funding sport, science and not taking money away from charities.

  • 73.
  • At 02:17 PM on 16 Mar 2007,
  • Paddy wrote:

Good piece, but but there is no need to apologise pre-emptively for using numbers at the start of the article, and again for talking about 'accounting' at the end.
As an economist, I would extremely disappointed if you didn't use any numbers.
It is probably this aversion by the British public to actually take the time to understand the numbers given to them that leads to journalists the fewest numbers possible. Which leads to single number headlines, like, "Cost of Olympics triples!". Which is where we started...

  • 74.
  • At 02:38 PM on 16 Mar 2007,
  • trevor wrote:

The Olympic Games coming to London in 2012 is, as far as I'm concerned, the best thing that has happened in this country since the 1966 World Cup and The Beatles - and that was a very long time ago!

Britain these days rarely 'struts its stuff' on the world stage in a positive way, yet we use our wealth to fund a foreign policy that relies too often on 'bombs and bullets'to get our way with other nations.

The cost of hosting the Olympics is not insubstantial, but as Evan rightly points out: the regeneration of that part of London will be a lasting legacy; the property developments will retain value after the event; and the current figure of ÂŁ9.3m includes a hefty chunk of contingency money.

Britain will be hosting the greatest show on earth, and I, for one, will attend as many events as I can.

The lasting 'feelgood factor' from hosting the event and seeing many of our athletes achieve their own ambitions will be felt around Britain for years - even the NHS will benefit financially as childhood obesity drops due to kids becoming more active because sport is more central to their lives.

The hospitality industries will thrive, scores of people will be employed during the event, and Britain will receive scores of visitors. Yet all our media and politicians seem to want to do is poor scorn on an event, which despite its own politics and cheating - which rightly have to be acknowledged as problems, still retains a higher degree of altruism than is generally seen in daily life, let alone practised by those in the public spotlight.

My childhood sporting heroes were Bobby Charlton, Bobby Moore and Gordon Banks. In my twenties, Steve Ovett, Seb Coe and Allan Wells all achieved Olympic glory in the 'blue riband' athletic events. And for the next 20 years of my life . . . ?

I remember running round the school playground as a six-year-old kid singing 'World Cup Willy' with my mates, even before England lifted the Jules Rimet Trophy.We were hugely proud that Wembley was the focus for the eyes of the rest of the world. And now, 40 years on, we have a fantastic new Wembley and we're holding the summer Olympic Games in five years time.

The problem is we have too much media, all wanting their own take and angle, to . . . yes, make money!
Remind me again, what's the cost of the Olympics?

  • 75.
  • At 02:48 PM on 16 Mar 2007,
  • Paddy Collins wrote:

Surely there is some silver lining here much of this money is being spent in the UK on goods and services which are taxed (VAT, income tax, corporation tax etc) or go to companies which spend the money they get in some part in the UK which is also taxed. The tax raised goes to pay in part for the games. The investment put into East London increases the value of property in the area - which is taxed and creates confidence which pulls in more private money etc. Local jobs are created reducing unemployment and benefit costs. When the games happen loads of people come and spend money. The UK gets huge media coverage which if we play it right makes it look a really great place to visit generating additional revenue/investment. I probably have n't explained this very well but I think ( I am by no means an economist) that there is an element of circularity or churn here wrt tax which does n't seem to be appreciated.

  • 76.
  • At 02:57 PM on 16 Mar 2007,
  • Sandy wrote:

To those of you complaining about the 'waste' of money on the Olympics, I would just like to ask what about the money 'wasted' on the arts every day, or this website (surely you can make your own entertainment?)? The Olympics are a magnificent celebration of human capability. Try and enjoy them - life's short!

  • 77.
  • At 03:05 PM on 16 Mar 2007,
  • John wrote:

The problem is Evan that many of your fellow journalists only think in 'headline'.
Remember the knocking of the Greek preparations for the last games? I don't remember any analyis of why the reports were wrong !

  • 78.
  • At 03:53 PM on 16 Mar 2007,
  • Simon Cursitor wrote:

Item: This is how much the cost has risen in under 1 year. We have 5 more to go, for people to realise what they've "forgotten" and add it in.
Item: As you yourself say, we will pay for this, and all the infrastructure will end up owned by the companies who will then sell it back to us for more of our money.
Item: After the Olympics are over, how many people from (say) West Lothian, will want to go all the way to London to use the facilities ? The facilities that they have helped pay for. The facilities that have draiend so much money out of other areas that their prospective users may well be homeless, out of work, imprisoned, or dead of MRSA by then.

Seriously, someone ought to ask the IAC whether they still want the Games in a country where the cost is rapidly spiralling to beyond the GDP.

  • 79.
  • At 04:02 PM on 16 Mar 2007,
  • Jason White wrote:

Good piece. You must be the only journalist in the country who can be bothered to explain the figures. For all the jonahs, why are you so negative? Mr Eiffel was mad to build his tower. Whats the point of Big Ben? That Opera house in Sydney could would have cost a quarter if if only it had a flat roof. The White House, why not a little semi like the rest of us. Channel tunnel train, pher, whats wrong with driving or flying? I'd rather stay home anyway!
Thank god there are some people with imagination and ambition. They may not always get their sums right but at least they create something.
If the world was in the hand of all you naval gazing knockers we'd still be living in a cave, no doubt complaining about being asked to cook a rock to get some stupid hard shiny stuff, whats wrong with stones anyway?

  • 80.
  • At 05:13 PM on 16 Mar 2007,
  • Mark wrote:

I would invite anyone who believes that people of the London Borough of Newham are an "elite minority". Please come to our borough and experience it for yourself. Newham and the surrounding boroughs of Hackney and Tower Hamlets make up 3 of the top 5 most deprived boroughs in the whole of the UK.

Unemployment and deprivation in London are worse than anywhere else in the UK. If you totalled the jobless in the whole of the UK (excluding London), the number of jobless in London would still be larger.

London is the economic centre of the UK. Though it may not be immediately obvious, what is good for London ultimately benefits everyone in the UK.

The Olympics is so much more than 2 weeks of sport. On purely local level for us in Newham the plans are breathing new life into a vast wasteland, and into a borough which is extremely poor and unattractive. The key challenge is ensure that local people get the jobs that come with it. I think this is an impossible dream even with so many out of work locally. A lot of work needs to be done at grass roots level to ensure that the local jobless are able, ready and willing to work. Providing jobs which are sustainable after the games has ended is another headache for the legacy planners.

If you would like the Olympics to work for you... you could do worse than invest in a property in the following postcode areas. E15, E10, E13 and E7.

I think we should all keep an eye on the legacy proposals (in particular) the green space to ensure that what is left is a true legacy for the community and the london cityscape rather than a massive private housing development.

To say that the money being spent on the Olympics would be benefitting your area of the UK is a mistake too. It probably wouldn't have been invested in your area of the UK at all, in fact. The Government is pumping in ÂŁ6bn over the next 5 year, and almost a billion of that is reclaimed in VAT. That's one billion a year, or ÂŁ16 each a year.

And these numbers might sound huge but a billion quid just isn't what it used to be. The Jubilee line extension which was completed in 1999 was a snip at ÂŁ3.5bn, the cost of building it today would be considerably higher methinks. Consider the current cost of Crossrail... ÂŁ16bn. If the decision is not made to build it soon, the cost will go even higher.

  • 81.
  • At 05:19 PM on 16 Mar 2007,
  • P Thomas wrote:

Nice one Evan but it's not your ÂŁ100,000 which you're spending to host the party in the first place. It's ours and we don't want a party because there's more important things to spend the money on.

Very interesting reading folks.

Just two quick confessions about my numbers.

Contrary to what I said in the fourth last paragraph of the posting, the ÂŁ2bn budget for organising the games has risen. During the bid process, I now think it was ÂŁ1.5bn.

And secondly, there is a grey area regarding my assertion that the original building figure was ÂŁ3.4bn, rather than 2.4.

The extra £1bn was not in the Olympic bid book; it was separate. So people were entitled to think the games had a cost of £2.4bn. But the extra billion was in the public domain and it was sometimes mentioned in pieces on the costs of the games. So it’s a bit fuzzy that one.

Finally, I'm interested in the strong views on the metropolitan bias of an article apparently defending the Olympics. This is a project much more expensive than most other local regeneration schemes. I can see why that arouses such annoyance.

But we're not that big a nation. I didn't think the national BBC should eschew coverage of the 1999 eclipse because it was just an event in Cornwall! It was a national event, (and if we'd been able to pay money to ensure good weather to see it, it surely would have been a national budget we'd have used.)

And being in Worcester doesn't exactly make you out of reach to the London games surely?

Anyway, I strive not to be London-centric. You won't hear me making the arguments sometimes made, that Londoners are hard done by. (This is based on the fact that both prices and incomes are higher in the capital than in the rest of the country, with a consequence that Londoners end up paying more national income tax than their relative living standards would merit.)

  • 83.
  • At 05:27 PM on 16 Mar 2007,
  • Gary Sector wrote:

Thank heavens - somebody in the media who is prepared to peek behind the headline horror stories (broadcast on an almost weekly basis, with tedious boredom, on the BBC1 Ten o'clock news) and look at the true costs - and more importantly benefits - of the 2012 Games.

A bit like a Puppy which is for life not just for Christmas, so the Games are not just for two weeks in 2012 but for their legacy.

This legacy will create a very real economic benefit, acting as a huge driver for regeneration throughout a forgotton part of East London. Add to that the extra economic activity in terms of trade, construction and no doubt come 2012 a "feel good bounce" trickling down to practically every part of the economy, and I consider the Games money well spent. Indeed, were I Gordon Brown I would be seeking to host the Olympic Games as often as possible!

We may even win some medals.

For now though the Gold goes to Evan for a positive story which rings true!

  • 84.
  • At 05:34 PM on 16 Mar 2007,
  • Gaffer wrote:

Interesting US perspective on the London Olympics debacle (scoll down a couple of posts)

https://economicdespair.blogspot.com

  • 85.
  • At 06:59 PM on 16 Mar 2007,
  • Lee Delta wrote:

Evan, Please get a life mate. Take a look outside of your speadsheet cell. Beyond staging a mega-event to promote global warming, McJobs and FastBucks what else are they doing to screw us?
They promises the "Greenest Games Ever" and they're destroying allotments. A desolate area? Even more so once they've moved the poor people on (who'll have the greatest difficulties financing their displacement) and moving the rich in. Vision, Legacy? What, and for whom exactly?

  • 86.
  • At 12:37 AM on 17 Mar 2007,
  • Stefan Paetow wrote:

Ohhh Evan, how dare you point out the faulty accounting of the tabs and the press! Hehe.

Yes, I found the articles to be somewhat alarmist too - Too alarmist to make sense. The government made it clear that the budget would not rise excessively, and to date this has not happened.

But it is not very confidence-inspiring when the costs do move up the billion pound ladder when they're not supposed to (not beyond inflationary increase anyway).

I'm glad you put the costs into perspective. It's a lot better than some of our media colleagues have done.

  • 87.
  • At 09:58 AM on 17 Mar 2007,
  • Andrew wrote:

Perhaps the Camelot could hold a lottery game based on predicting the final cost of the event as one of it's Olympic fund raising games?

  • 88.
  • At 12:27 PM on 17 Mar 2007,
  • Mark Marsh wrote:

Issues like this always bring out the usual "the money could have been better spent on something else" arguements. If it's not the Olympics it's Trident, the Scottish Parliament or whatever. I suspect the billions of pounds, if not spent on the Olympics, would not be used to improve health, education or housing but for tax cuts.

Is this person a member of the government? If not, why the royal 'We'? I am disgusted. This government could not run the proverbial piss-up in a brewery. Oh it is only 9.35 billion (and counting). My estimate is that the final bill will be around 23 billion. As I said when the costs for the Scottish Parliament started rising from 23 million to it's final 450 million, 'This country does not have that much money to throw away!' Unless this is a clever scheme to divert some taxpayer funds into the black hole that is public services pension funds.

  • 90.
  • At 01:53 AM on 18 Mar 2007,
  • Alastair Mackie wrote:

A good old fashioned Great British HURRAH to Mr Davis; apparently the only journalist capable of financial analysis! The money is nothing compared to the honour, privilege and legacy of the Olympics – Where’s that blank cheque…I’ll sign it.

  • 91.
  • At 05:03 AM on 18 Mar 2007,
  • Tony McLoughlin wrote:

I'd like to be invited to your ÂŁ100,000 house party please. It would be a wonderful opportunity to meet your circle of friends , and to find out where you can buy such a bargain! On second thoughts, forget it! The venue is probably in some drug fuelled, crime riddled estate, ideal for redevelopment for a 2 week sports event, where your bargain opportunist associates can cash in yet again. What a bizarre world!

  • 92.
  • At 09:52 PM on 19 Mar 2007,
  • Joanna M-C wrote:

A small but important point in response to Evan's latest set of comments. The London Organising Committee of the Olympic Games and Paralympic Games has a ÂŁ2 bn budget - and this budget will be privately financed. It has NOT risen - in the bid book, candidate cities were asked to list budgets in US dollars and in 2004 prices - hence the ÂŁ1.5 billion listing. In 2012 outturn prices, taking into account inflation and currency exchange, the figure is ÂŁ2 billion. Appreciate the range of figures can be complex, but this budget is privately financed and has not increased. Joanna M-C, London 2012.

Ah, Joanna, but the LOCOG budget has a sting in its tail. The current intention is for it to be privately financed. But if there's a shortfall, who pays? Yep, you guessed it - the taxpayer has to bail it out. If there's a surplus, who benefits? Yep, you guessed it - not the taxpayer at all, but the International Olympic Association and British Olympic Association in pre-agreed proportions.

I'm very angry indeed about the gross incompetence exhibited by our politicians in respect of the Games. We have to underwrite the entire capital spend for the Games, without which they cannot take place. We have to bear all that risk. What if all those athletes' housing doesn't raise as much money as we thought? What if we goof up the profit sharing agreements with developers? Costs will inevitably fall back on taxpayers.

Furthermore, the costs are muddied by the politicians' insistence on conflating the regeneration costs with the Olympic capital budget. They're not the same and shouldn't be treated as the same. However an increase in either means that we enjoy, pound for pound, fewer benefits from the resulting regeneration. I just don't think it's good enough to shrug and ask us to think of the benefits. We're already getting many hundreds of millions of pounds less benefit from the regeneration as a result of this mess.

And for the benefit of your readers. The purpose of a hefty contingency of 30% is so that our politicians can claim a 'victory' when they only overspend by 29%.

  • 94.
  • At 08:54 AM on 21 Mar 2007,
  • Pete wrote:

Well all the hype and media attention given both positive and negative to the Olympics. I have a question: Living in the so called North (North of the watford Gap) If Birmingham or Manchester or any othetr city had tried for the olympics would it have been backed by HMG or the 'celebrities'. I think not. The cost of this White Elephant is enormous and will not benefit 90%+ of the population of this country, like other large projects - Wembley, Millenium Dome! Maybe we should stop trying to be the world power we think we are and concentrate on where we actually are an middle ranking world power.

  • 95.
  • At 12:44 PM on 22 Mar 2007,
  • Roland Davis wrote:

An earlier post (no 79) likens the Olympics to the Channel Tunnel (“Thank god there are some people with imagination and ambition. They may not always get their sums right but at least they create something”). Whoever wrote that, I hope he doesn’t have any power to spend other peoples’ money.

Grand projects often have financial problems and then get restructured. Years later people say, “Isn’t it lucky people had imagination - if we had trusted those shortsighted financiers we would never have built that valuable asset.” But they ignore the losses made by the original investors or the time value of money on those losses. Having worked for 7 years on the Channel Tunnel’s financing I can tell you that, properly taking into account the time value of money, even if the tunnel operates successfully for a century, its profits will never make up for the losses made by the earlier investors.

In most similar cases, investors and tax payers get stuffed while those responsible for the misleading forecasts – construction companies, consultants, and managers - make a fortune and get knighted.

Half the people writing to this site think the Olympics is wonderful, never mind how much it costs. The other half think that instead of helping the country it serves incompetent bureaucrats, corrupt officials, and elite athletes, many of whom cheat with drugs. Public subsidy should be reserved for less controversial causes.

  • 96.
  • At 01:20 PM on 22 Mar 2007,
  • Z Benveniste wrote:

I like the analogy of a ÂŁ100,000 pound house... but wait a second. This 'ÂŁ100,000 house' (x billions olympics)to host a party would "not be owned by the taxpayer" and "should be some benefit to the taxpayer".
What kind of insane investment is that? If my family and friend were asked to invest in this 'House' and from your own figures over the next decade one would not need to have such a large family or circle of friends to invest ÂŁ100k, we would be left with what exactly ÂŁ5000 of capital assets which we may indiectly benefit from, maybe ÂŁ10,000. Please feel free to do your own sums.
Wait a moment... we wouldn't even be invited to the party!

Well all this is clear to you and I and a handful of people. What scares me is it's like a club of people who are willing to make a rational assesment of things. The the other million read the Daily Mail front page and the rest vote for their favourate football team, better or worse. Sigh! Would it be so bad if we were run by accademics and philosephers appointed by the gods?

  • 98.
  • At 03:12 PM on 22 Mar 2007,
  • Michael Coffey wrote:

Thanks for a very clear article that takes some of the mystery and myth out of the pessimistic commentaries. However, shouldn't the existence of a ÂŁ2.7 billion contingency fund be kept secret? Surely, the very knowledge of it will encourage works contractors to over-run on costs and also weaken the resolve and discipline of the spenders to keep within budget.

  • 99.
  • At 03:37 PM on 23 Mar 2007,
  • Steven Wittich wrote:

Thank you, Evan. A clear explanation. I cannot agree that the VAT component should be discounted because it goes back to the Treasury. The VAT component of the funds seized from the Lottery will be a permanent loss to the Lottery good causes.

  • 100.
  • At 11:04 AM on 10 Apr 2007,
  • Stuart wrote:

Good to read some sense instead of the usual sensationlist rubbish about the Olympics. East London was always going to be redeveloped at great expense by 2020 regardless of the Olympics. The budget for this regeneration has been forced to be spent earlier than planned because the infrastructure for Stratford City needs to be inplace before the stadia are built. This huge swathe of derelict land is almost the last place left to build on in London. Without it land prices will continue to soar and ordinary people/key workers will be completely forced out, London's economy will grind to a halt and the rest of the country will be a great deal poorer without the income London generates. The Olympic legacy will be a modern city with modern infrastucture that will last for hundreds of years while the rest of London's infrastructure slowly disintegrates from age. London needs this renewal and the whole country needs London!

  • 101.
  • At 09:46 PM on 29 Jun 2007,
  • rajen wrote:

i think that having the olmypics in london is just throwing the money we have out of the window! For so long we have been craving for the NHS and schools across Britain to improve and now we have the money we decide to use it on a swimming pool and a running track

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