By Richard Johnstone | 9 March 2012
MPs have warned that the cost of staging the London Olympics this year could go over budget.
The Public Account Committee’s report into preparation for the Games found that the £9.3bn public sector funding package has almost all been used, in part due to a ‘significant increase’ in security costs.Committee chair Margaret Hodge said that the committee is now ‘concerned about whether the running of the Games will be held within budget’.
The PAC said that they wanted to ‘applaud the progress’ made so far, with the Olympic Delivery Authority’s ‘exemplary’ building programme, including the Olympic Stadium, on track and within budget.
However, the committee found that ‘operational and financial risks’ had emerged in areas that were the responsibility of the London Organising Committee of the Olympic and Paralympic Games (Locog).
The estimated security cost for the Games has almost doubled in a year from £282m in 2010 to £553m in December 2011 leaving the overall budget for the event ‘very finely balanced’, the MPs said. The government would be obliged to meet any overspend.
Locog’s initial projections for the cost and scale of venue security were based on a ‘finger in the air estimate’, the report found. This led to it having to renegotiate contracts for venue security and it had ‘almost no contingency left to meet further costs’.
Hodge said was ‘staggering that the original estimates were so wrong’.
She said: ‘Locog has had to renegotiate its contract with G4S for venue security from a weak negotiating position and there is a big question mark over whether it secured a good deal for the taxpayer.’
The committee also warned that the government was ‘dispersing responsibility’ for the legacy from the Olympics. If the costs of legacy initiatives are included, total public spending would reach around £11bn, Hodge stated.
She called for greater clarity about who was accountable for issues such as the future of the Olympic stadium. There is a need for greater assurance, following the collapse of the initial deal on its future, that the stadium ‘must not become a white elephant’, she said.
Hodge added: ‘Given the scale of costs outside the funding package, what we need within six months of the end of the Olympics is a single auditable account covering the total costs to the public of the Games and their legacy.’
Responding to the report, the Department for Culture,
Media and Sport said there was
£500m worth of uncommitted contingency remaining.
A spokesman said: ‘We are in a strong position and, while we can't be complacent, are confident that we can deliver the Games under budget.
‘Funding for the legacy programmes that the PAC refer to comes from existing business-as-usual budgets and we have been clear about this. These are for projects designed to capitalise on hosting London 2012 but are not an additional Olympic cost.’
A Locog spokesman added that ‘with less than 150 days to go to the Opening Ceremony of the Olympic Games, this large and complex project is on track’.
He said: ‘We are testing and fine-tuning plans, and balancing and mitigating risks to deliver an Olympic Games and Paralympic Games on budget, and which makes the nation proud.’
