London chiefs will stick to budget

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Games organisers have yet to sign a final contract for the Olympic village with Australian constructors Lend Lease, who are demanding more money than the budget allows.

But Jowell said: "What everybody in this understands is that there is no more money. There is no more money beyond £9.325billon."

The Government has earmarked £492million to build the village but that figure is under strain due to the global economic climate and they will almost certainly have to raid their contingency fund to finance the contract.

Jowell insists, however, that spending will not go higher than the overall budget figure.

"We have a meeting of the funders' committee next month. The important point is that the contingency fund is there if Lend Lease need further help in the short term," she said.

"But the same rule applies to this as right across the project, which is that the Government contingency is the funder of last resorts within the absolutely immovable headline figure of £9.325billion.

"We know that this is a big risky project, we know that time is the greatest enemy, we know that the investment is further complicated by the economic downturn and the credit crunch. All those are real-time risks that we have to deal with."

Jowell stressed that work has already started on the village, and that money will be recouped after the Games as the accommodation for 17,320 athletes and officials is converted into 3,000 apartments and sold.