£2.5 billion is new price of Olympics

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Culture Secretary Tessa Jowell is poised to throw her support behind a London bid for the 2012 Olympics, but the potential bill for the Games is likely to rise by more than a third to around £2.5 billion.

Sources close to the project have revealed to Standard Sport that following a meeting with British Olympic Association leaders yesterday Jowell is determined to make sure the estimated costs of the event are realistic before putting her case to the Cabinet next month.

The Secretary of State has been persuaded of the sporting benefits of hosting the Games after she and Sports Minister Richard Caborn completed a series of visits to former and future Olympic cities in recent weeks.

But Ministers are haunted by the bad publicity surrounding the troubled Dome project. Without the security of realistic figures, Tony Blair is unlikely to take on the huge logistics of an Olympics which will have an impact on transport, housing and security as well as on sport. A bid alone is expected to cost £13 million, £7m of which should be covered by the private sector.

British International Olympic Committee member Craig Reedie refused to confirm Jowell's views on the project, but said: "The three key stakeholders are refining the costs and benefits prior to putting the case in the New Year."

Jowell's department is worried the report did not account for extra costs including purchasing land, upgrading transport networks, security, project risks and inflation. A recent independent report by consultants Arup estimated the costs of building the facilities and staging the event at £1.8bn.

Sources said this was too conservative and was likely to be revised upwards. It is not expected to exceed £3bn, however.

There was speculation that the true bill for the Olympics alone could be as much as £5bn, but this was dismissed yesterday. One of the reasons given for the revised figure is that civil servants are now working to a different formula to calculate the cost than that used by Arup. A Treasury official was on the Government steering group that advised Arup. Normally such calculations are made according to the Treasury Green Book, which states that sums for future events should take today's prices and discount by six per cent a year.

But after the report was submitted the Government threw out their own rules, added inflation and increased the contingency plan for extra costs from 6 to 10 per cent. This forced through the revision.

The cost of Olympic buildings such as stadiums and an athletes' village is usually included in financial estimates for Games, but the bill for upgrading infrastructure is not because it is seen as money a city would spend anyway.

It is possible that the costs together could total £5bn. Part of that would be covered by cash from television and sponsors, although the IOC have yet to sign a TV rights deal for 2012.

The BOA, Mayor of London Ken Livingstone and leading sports figures have talked about launching a two-year campaign next year before the IOC makes their 2012 decision in 2005.

But without Blair's backing, London will not join New York, Moscow and Paris in what is expected to be the most competitive Olympic races for years.

 

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