The Government has left itself “financially exposed” over the 2012 Olympic Games and at risk of letting costs spiral out of control again, the public spending watchdog warns today.
In a highly critical report the Public Accounts Committee condemns the Government for allowing the original Olympic budget to treble to £9 billion and calls for urgent risk management to give warning of potential problems.
The report argues that no individual has overall responsibility for delivering the Games and the large numbers of bodies meant there was a high risk of time delays and cost overruns.
Two new bodies have been set up: the Olympic Delivery Authority (ODA), to provide facilities, and the London Organising Committee of the Olympic Games (LOCOG), to stage the Games.
While the ODA relies largely on public funding, LOCOG is trying to raise £2 billion from private sponsors to run the event. However, if it fails, the Government is the final guarantor for the cash. “In seeking to prevent further calls on public money the Department needs to satisfy itself that LOCOG’s costs are under control and its revenues on track and should develop a plan for doing so,” says the report.
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Edward Leigh, the committee’s Tory chairman, said that, if the Olympics were to succeed, they would have to be managed with an “iron hand”.
The Department for Culture, Media and Sport was ultimately responsible for coordinating the bodies, he said. “It is worrying, therefore, that strong arrangements for monitoring progress and managing risk are so far not in place.” Also absent are plans for ensuring that Olympic facilities will meet the needs of users after the Games.
Hugh Robertson, Shadow Culture Secretary, said Gordon Brown’s decision to move Tessa Jowell, the Olympics Minister, to the Cabinet Office but keep the Olympics executive at the DCMS, would make things worse.
“This report highlights two important areas of concern. Firstly, the issues surrounding the coordination of the Olympic project highlight that the Government’s new reporting lines, with the Olympic executive in one department and the Olympics Minister in another, are a total shambles,” said Mr Robertson. “London 2012 needs simple and accountable Government support structures to ensure successful delivery and these are not in place.”
The committee also criticises the Government for allowing the initial budget for building the Games to rise from £3 billion to £9 billion.
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At the time the DCMS had expected to raise £738 million of private sector funding for part of the Olympic Park, which would have covered 25 per cent of the costs, but this was never achieved. The budget overran because construction costs ran ahead of inflation, a big contingency fund was established and extra money was made available for private consultants.
Tessa Jowell, the former Culture Secretary, was forced to raid a further £675 million from the National Lottery fund to help meet the costs.
The report also says that there is a lack of clarity about how five new venues will be adapted for use after the Games. “Legacy plans for using [them] after 2012 should now be finalised with ownership and responsibility for conversion and running costs resolved for each venue,” it says.
The Olympics Minister said much progress had since been made.
“A comprehensive budget for 2012 has now been outlined, a complete reappraisal of all costs has been carried out, and new key appointments made, including an outside expert with decades of experience in controlling costs to head the Government’s Olympic executive,” said Ms Jowell.
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Number Games
3: London will become the first city to host the modern Olympic Games three times, having done so in 1908 and 1948
26: Sports featured in the programme
£9.3bn: The total estimated cost for the Games and the regeneration of the East London area
£400,000: The cost of the London logo
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8 million: Estimated number of tickets available for the Games
Source: London Assembly