Ministers are hiding the true cost of the Olympic Games, says Commons watchdog (and it's likely to be £9.3bn)

The spiralling costs of the London Olympics are being absorbed by an enormous emergency fund, say MPs.

In a report next week, they will savage ministers for failing to account initially for "entirely foreseeable" expenditure such as tax and security, causing the original budget to rise from £3.4billion to £9.3billion.

Tuesday's report from the Commons Public Accounts Committee is expected to say the Government has been either incompetent or acting in bad faith by hiding the true costs from the public.

Labour MP Don Touhig - a former minister who sits on the committee - said the multi-billion budget increase was likely to enter the Guinness Book of Records as the "most catastrophic financial mismanagement in the history of the world".

The report will also complain at the lack of financial controls in place to monitor the project. For example, a contingency level has not been set for each element of staging the Games in 2012.

The £2.7billion emergency fund - announced last year - is likely to be described as a safety net put in place to ensure the Games come in under the revised budget.

It has become clear in recent months that ministers are including the contingency fund in their overall estimates of what the Games will cost.

MPs on the accounts committee raised their fears while grilling organisers of the 2012 Games for their report, the second in a series of progress reports to be released over the next four years.

Alarm bells rang after an admission by Jonathan Stephens, a senior official at the Department for Culture, Media and Sport, that the 'only safe assumption is to expect it [the contingency fund] all to be spent'.

Olympic Delivery Authority chief David Higgins, however, said: "A contingency is not there to be locked in a box and never touched."

When London won the games in 2005, the original budget was set at £2.4billion for construction costs, with a further £1billion set aside for regeneration costs.

Last year, Olympics Minister Tessa Jowell was forced to admit to the Commons that costs had risen to £9.3billion, including tax, security and the emergency pot. There are predictions that costs could soar to £20billion.

In the first committee report of last summer, MPs warned of further raids on the taxpayer as "any slippage in the delivery programme would bring the risk of having to pay more".

The committee's chairman, Tory Edward Leigh, has once again warned the Government to "expect a critical report", saying it had "grossly underestimated the entirely foreseeable costs".

A committee source told the Daily Mail last night: "It is going to be highly critical about the overruns which have got us where we are and the problems of hitting the target budget without using the contingency."

Ministers are also expected to be accused in the report of 'robbing Peter to pay Paul' by diverting more than £2billion from National Lottery funds. During evidence sessions, Labour MP and committee member Austin Mitchell said leaving VAT out of the original calculations was "amazing" and left the impression that initial figures were "intended to deceive".

It has also emerged that the cost of buying land and compensating owners would be £30.4million above current estimates "funded from the approved budget contingency".

The Tories said the news "reinforced the need for a much more open budget".

Committee member Richard Bacon called the figures a "worrying development".

Earlier this month, Jack Lemley, the former chairman of the delivery authority, scoffed at the £9.3billion cost and accused London mayor Ken Livingstone of suppressing the true cost to win public backing.

He said that he was working to a budget of "well over £12billion" and he had expected it to rise to £20billion.