2012 chiefs forced to dip into contingency fund

The Olympic Delivery Authority had to dip into the contingency fund following complications with an underground cabling project last year.

The disclosure comes only 10 months after ministers set the Games budget at £9.3 billion. MPs were later told the £2.7 billion contingency fund in the budget - initially billed as an ultra-cautious provision - would probably be spent in full.

The ODA has already banked £500 million of public funds to cover early cost overruns. Within that is £177 million to cover unforeseen problems with the project to lay power cables under the 500-acre Olympic Park. The task of laying 200km of cables in two 6km tunnels was budgeted at £282million. But an extra £30million is required already due to problems boring into the earth to create tunnels.

Project leaders say this shows it was prudent to build a 40 per cent contingency fund into the construction budget. They insist it is not an early warning sign taht the ODA's budget will be inevitably exceeded.

A further £238 million of the contingency fund has been set aside for potential extra security costs outside the Olympic Park, but has not been spent yet.

Half the remaining £2billion contingency is for "unpredictable" cost risks and can only be released with the approval of a powerful funders' committee chaired by Chancellor Alistair Darling and including Mayor Ken Livingstone and four other Cabinet ministers.

The other half is for "known risks" and is controlled by the Government Olympic Executive, in the Department for Culture, Media and Sport.

In November, Jonathan Stephens, permanent secretary at the department, told MPs on the public accounts committee it was a "safe assumption" all the contingency would be spent.

Committee chairman Edward Leigh accused Mr Stephens of either "sheer incompetence" or "deceit" in providing the original £2.4billion estimate for the Olympic budget during the bid.

He told Olympic chiefs to expect the committee's report to be highly critical when it is published next month.

Olympics minister Tessa Jowell has pledged to give Parliament updates on the budget twice a year. Tomorrow she will appear before MPs on the culture, media and sport committee.

MPs will demand to know how ministers are fulfilling a pledge of £300 million to boost Britain's medal haul in 2012. The Government wants £100 million to come from the private sector, but it is unclear who is going to give the cash.