Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Olympic budget will spiral, says select committee

The chairman of a House of Commons committee monitoring the 2012 Olympic budget has said he expects the cost of building the Games will be much higher than the current £9.3 billion.

Edward Leigh, Public Accounts Committee chairman, told Jonathan Stephens, permanent secretary to the Department for Culture, Media and Sport, that he expects the Government to “start throwing money” at the Games as the deadline approached.

Speaking during a committee hearing into the cost of the Games, he told Mr Stephens: “Going by your record so far I don’t have any confidence in your ability to plan ahead. I think what’s going to happen in the run up to these games in 2012 is that you will start to panic, things will be half-finished and you will start throwing money at it. It’s happened with every previous Olympics and it will happen here.”

Mr Leigh attacked the Government’s assumptions over the original budget for the games. He said: “What I can’t understand is why you didn’t budget for such obvious factors as tax, contingency and running costs in the original budget.

“Some might say that you deliberately put in a low bid to get the games and fool the people. I put it to you that you knew about all these uncertainties at the time and you either acted in bad faith or you were incompetent.”

Fellow committee member Don Touhig said: “You have already made a £5 billion error in underestimating the cost of the games.

“Surely that’s got to go into the Guinness Book of Records as the most catastrophic financial mismanagement in the history of the world.”

Mr Leigh also questioned the Government’s decision to put in place a £2.7 billion contingency fund.

He said: “The suspicion is that this is a very large contingency because you want to make sure this £9 billion is the upper limit.

“For that reason it’s puffed up with lots of uncertainties, it’s not very transparent, you’re using it as a safety net so you can come back to us and say you’re under budget.”

And committee member Alan Williams said: “The contingency sum is almost 75 per cent of the entire original budget.”

Private construction companies have invested only £165 million in the Olympics, compared to the £738 million the government had estimated.

Mr Leigh said that this was because the private sector lacked confidence in the government’s proposals for the Olympic site.

The committee also criticised the bureaucracy surrounding the Olympic bid and the increase in estimated project management costs from £16 million to £517 million.

But Mr Stephens defended the Government’s figures and said that exact costings before the Olympics had been won had been impossible.

He said: “This bid was supported by a selection of experts. This wasn’t a project that was certain to go ahead. Land wasn’t in public ownership. Detailed site investigations couldn’t be undertaken. Detailed plans couldn’t be drawn up. We’ve had to make allowance for unknown unknowns. This is a realistic and prudent way to manage the risks.”

He said that the cost of the Olympics would rise to £5 million a day until 2012.