Government funding for the 2012 Olympics will rise to Â£6 billion, with the rest of the Â£9 billion costs met from London’s council tax payers and the National Lottery.
The additional costs include approximately Â£2billion spent on regenerating the Thames Gateway area – not direct Olympics spending – a Â£2.7 billion contingency fund, plus an extra Â£600 million in security costs.
The announcement was made to the House of Commons at lunchtime today by Tessa Jowell, the Olympics minister (pictured).
To cries of “scandalous” from MPs on the opposition benches, Jowell said the National Lottery would make an extra contribution of Â£675 million to the cost of the Olympics.
The Tory Olympics spokesman, Hugh Robertson, accused ministers of “raiding” the National Lottery to meet the funding shortfall, penalising clubs and small organisations in the process.
Original estimates when London’s bid to stage the Games was successful in 2005 put the nfrastructure costs of the Games at Â£2.4 billion.
In a detailed statement to the Commons, Jowell said that when Britain put in its bid for the Games, the costs of the Olympic Park and infrastructure were put at about Â£3 billion, plus Â£1 billion for regeneration.
After a detailed review, the Olympic Delivery Authority (ODA) would be given a budget of Â£5.3 billion to cover construction costs up to 2012. This comprised Â£3.1 billion for Olympic venues, Â£1.7 billion for generation and infrastructure, and a Â£500 million allowance for programme contingencies.
The ODA would pay Â£840 million in VAT, which controversially had been overlooked in original cost estimates, but that amount would be “covered in full by the government contribution”, according to the minister.
She said the government had set a “prudent” contingency fund of Â£2.7 billion, which could be drawn on only under “very tight conditions” to ensure “the timetable is met and quality maintained”.
Jowell said: “London 2012 will bring huge financial gain to the whole country … and it is only fair that the Lottery good causes should share in any such windfall.
“I am determined to ensure that this temporary diversion from the existing good causes to the Olympic good cause is done with the least possible disruption.”
Winning the Olympics had brought an extra Â£7 billion of private sector investment to one of the most deprived areas in Europe, Jowell said.
“The announcement today means it’s full steam ahead for 2012,” she added.
While the budget revisions are unlikely to be welcomed anywhere, the minister’s announcement ought to curtail the often feverish budget “bidding” that has taken place in the past couple of months, with one outlet speculating that the Olympic construction budget would be far higher than Jowell has announced.
“It’ll all be worth it”– Hugh Muir, Guardian (may require registration)
“Two streams of work, two budgets” – Lord Coe
“Ministers are coming to terms with cost of victory” – comment by Mihir Bose
No Olympic levy for Londoners – protestors website