Committee of Public Accounts

PREPARATIONS FOR THE LONDON 2012 OLYMPIC AND PARALYMPIC GAMES

Publication of the Committee's 28th Report, Session 2009-10

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

"It is good news that the main construction projects associated with the 2012 Games are making very good progress. What's worrying is that the financial position is tight. Of the sum left within the Olympic budget for contingencies, £1,270 million, most is currently earmarked for known risks. But unforeseen problems continue to emerge to place fresh demands on the contingency. As we have seen, the economic downturn has already led to the Olympic Village and Media Centre having to be funded by the taxpayer. And the unplanned work to secure and maintain the Olympic Park after construction could require a further £160 million of the contingency.

"In evidence to this Committee, the Department committed itself to delivering the Games within the £9,325 million budget set in March 2007. If there is any chance of this budget being exceeded, then we require the Department to tell us immediately.

"The body responsible for putting on the events themselves, LOCOG, is intended to be self-financing, partly through ticket sales and merchandising. But if it exceeds its budget, the taxpayer will have to make up the difference. LOCOG must establish a soundly calculated funded contingency. We also want to know how LOCOG intends to balance the need to raise income from ticket sales with its commitment to the principle that tickets be affordable to the general public.

"Despite our previous recommendations and the forecast expenditure of over £850 million, the final use of the publicly funded venues, in particular the Main Stadium and Media Centre, is still up in the air."

Mr Leigh was speaking as the Committee published its 28th Report of this Session which, on the basis of evidence from Department for Culture, Media and Sport (the Department), the Olympic Delivery Authority and the London Organising Committee of the Olympic Games and Paralympic Games (LOCOG), examined the progress in preparing for the London 2012 Olympic and Paralympic Games.

Since our last report on preparations for the London 2012 Olympic and Paralympic Games in July 2008, the Olympic Delivery Authority has continued to make good progress with its delivery programme. The main construction projects are on track to be completed in time for testing in early 2011.

The Department has committed to delivering the Games within the £9,325 million budget set in March 2007. Most of the budget is for the Olympic Delivery Authority which has done well to control its costs and find savings across its programme, enabling it to absorb additional costs for the Olympic Village and Media Centre projects. These two projects are now being publicly funded, contrary to original plans.

While £1,270 million of the original £2,747 million contingency within the Olympic budget now remains and is available to the Olympic Delivery Authority, the majority is earmarked to meet known risks, leaving only £194 million 'headroom'. It may be that not all of the known risks will materialise, but new cost pressures continue to emerge. For example, previously unplanned work to secure and maintain the Olympic Park, between construction completion and handover to the Olympic Park Legacy Company, could require a further £160 million of the contingency. Staying within the budget also depends on receiving some £600 million receipts from the Olympic Village development. So the position is tight, with no room for complacency and limited flexibility to respond to new problems as the Games approach.

LOCOG is intended to be self-financing. There is, however, the risk of a deficit and there is not a contingency fund in LOCOG's budget for dealing with problems that might arise. Some £400 million of the income LOCOG still needs is to come from the sale of tickets. LOCOG assured us that it is committed to the principles of affordability and accessibility in setting its ticketing policy.

The delivery of the Games is highly dependent on coordinating the work of a wide range of organisations. But there remains uncertainty about the responsibilities and cost of some organisations, and who has ultimate authority to make operational decisions in the run up to the Games.

Despite our previous recommendations it is still not clear what will happen to major assets, including the Stadium and Media Centre, after the Games. Until plans are in place and there is greater clarity on what the Government expects to generate from future sales of land and assets, there will be uncertainty about the timing and value of any reimbursements to funders, including the National Lottery.

The Olympic Delivery Authority has targets relating to the employment and training benefits of the construction programme. In some cases, however, these targets were not set early enough, and are not sufficiently challenging for a flagship government programme like the Olympics. In addition, lessons from the Olympic programme now need to be identified and applied to other public construction projects.