The Public Accounts Committee's report on The budget for the London 2012 Olympic and Paralympic Games

I will put my cards on the table, I was against the London bid for the 2012 Olympic Games because I suspected that, like all Government flagship schemes, it would go hugely over budget and also because I had little faith in the facilities being ready in time. As time has passed my first objection has looked to more and more justified. Last week the Public Accounts Committee under the forensic leadership of Mr Edward Leigh presented its latest report and it did not make good reading for Tessa Jowell and her team. This is a long and detailed report, but the summary and the Conclusions and Recommendations sections should provide you with enough information re this debacle.

Some key points that I think need repeating are:

"At the time of London's bid to host the Olympic and Paralympic Games in 2012 the cost of the Games was estimated to be just over £4 billion. The costs were to be met by public sector funding of £3.4 billion, with a further £738 million from the private sector.

After London was awarded the Games, the Department for Culture, Media and Sport and the Olympic Delivery Authority reviewed the cost estimates and in March 2007 announced a budget of £9.325 billion."

That's an increase of 133% and this is partly because:

"The March 2007 budget included contingency provision of £2.747 billion. This sum was not included at the time of the bid despite Treasury guidance that budgets for major projects should allow for the tendency to underestimate costs."

Two more omissions were:

"The March 2007 budget also included a preliminary estimate of £600 million for policing and wider security, over and above the cost of site security during construction. No estimate for the cost of policing and wider security was included at the time of the bid. In addition, the Olympic Delivery Authority's programme delivery budget has risen to £570 million, compared with an original estimate of just £16 million."

There was also the infamous omission of VAT from the budget, something that I still find hard to believe.


The original budget was also "out" on the amount of private sector funding, only a little out:

"The estimate of £738 million private sector funding towards the cost of venues and infrastructure at the time of the bid was revised to £165 million "

just how was the budget arrived at? What was done to ensure it was an accurate estimate?

The first "Conclusion and Recommendation" is:

"Contrary to good practice, the Department did not include programme contingency, now £2.7 billion, because the scale and complexity of the undertaking were not appreciated at the time of the bid. The costs of tax and security, now estimated at over £1.4 billion, were also excluded from the estimates as they were uncertain. Yet £738 million of funding from the private sector was included, despite not being supported by robust analysis. All costs and revenues should have been included from the outset, with the uncertainties explained and a contingency provided."

In other words the initial estimate was, as we say, "dodgy".


Read the rest of the report at your leisure, the bottom line is that the bid was massaged so that London could win the vote and then the real costs were calculated. This is typical of the way New Labour have managed large projects; ineptly.