Watchdog warning over 2012 costs

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The National Audit Office said the £9.3 billion budget announced by Olympics minister Tessa Jowell in March had put the project on a "firmer financial footing" and was "sufficient to cover the estimated costs of the Games" as plans stood.

But the watchdog warned this was true only "with the important proviso that the assumptions on which the budget is based hold good".

In a report on the escalating bill for the Olympics, the NAO warned any project of the scale, complexity and profile of the 2012 Games would always involve "a high level of inherent risk". And it identified venue design, construction price inflation and private-sector funding of the Olympic Park as elements where "significant areas of uncertainty" remain over cost.

Auditor General Sir John Bourn said the process of setting the budget for the Olympics had been "thorough", though he noted the level of public funding had "increased greatly" from the £3.4 billion estimated when London won its bid in 2005.

He urged the Department of Culture, Media and Sport to keep a rein on spending, in order to eat up as little as possible of the £2.7 billion included in the budget for contingencies.

Sir John said: "The Olympic Games is now on a firmer financial footing thanks to the budget announced in March 2007. This should help all those involved in delivering the Games to move forward with greater confidence.

"However a budget is just that - a budget, not a target. The department must still work to contain funding and achieve value for money, and should make clear what will be delivered for the public's money.

"There will be a need for clear and quick decision-making on funding, effective commercial arrangements with suppliers, and finalisation of designs and legacy plans."

Ms Jowell welcomed the NAO report, adding: "We are determined to keep an iron grip on costs. That is why we have set in place rigorous cost oversight procedures within Government, including a cross-Government ministerial funders committee and task force to assess any requests for further contingency funding under strict criteria."