Azara Blog: BBC claims that London Olympics bill is now £9bn

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Date published: 2007/02/24

The BBC says:

Opposition politicians have called for tighter control of spending for the 2012 London Olympics after the BBC revealed the cost could rise to £9bn.

The new figure is four times that set out in the city's bid for the Games - up from an initial figure of £2.35bn.
Costs have mounted since London won the right to host the games in July 2005.

In the wake of heavy criticism of the government's handling of the games, Culture Secretary Tessa Jowell admitted to parliament in November that the cost of the Games would rise by £900m - 40% - to £3.3bn.

But the BBC has found that construction alone will equal that figure.

In addition, the BBC has learned that a £2bn construction contingency fund will be set aside, with regeneration costs of £1.8bn and a £1bn VAT bill taking the total higher.
Along with the 60% contingency added to the construction cost, the rise in commodity prices, adjustments to transport figures to reflect 2012 prices and a revised estimate for inflation on construction costs have led to the spiralling Olympic bill.

In addition, the land in the east end of London chosen for the site needs decontamination and major remedial work before it can be fit for the games.

The Treasury has also decided that the Olympic Development Authority will have to pay VAT.

While VAT is in effect paid to the Treasury, the cash initially still has to be found before it is reclaimed.

A contingency fund is (or should be) normal in any building work, so it's amazing it was not mentioned before now. And although most people work with much smaller contingencies than 60%, this is the government we are talking about, and 60% is probably optimistic.

On the other hand, the regeneration costs are not really the responsiblity of the Olympics, although somehow the ruling elite of Britain decided that the only way the regeneration could go ahead is if there were Olympic Games in that area. Go figure.

And the VAT could be a non-issue. The Treasury should have decided long before the bid was made that VAT was due. But given that it is now due, the question is who is going to pay that part of the bill. If it is the national government then the bill makes no difference because it is just the government paying itself. (Well, perhaps someone in the civil service gets a whacking great bonus if enough VAT is collected in a given year, so this might not be quite a zero sum game.) But if the London council tax payers have to foot the bill then the VAT is a straight transfer of money from London to the rest of the country. (Of course, the Olympics generally is a transfer of money the other way around.)

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