Press Release - The budget for the London 2012 Olympic and
Paralympic Games
20 July 2007
The process for setting the London 2012 Games budget has been
thorough, the National Audit Office says today, but the level of
public funding has increased greatly, and significant areas of
uncertainty remain including the finalisation of the design of
venues and the intended wider benefits.
These are the main findings in a new report by the Comptroller
and Auditor General which examines the development of the budget
for the Games.
At the time of the bid to host the Games the estimated gross
cost was just over £4 billion, to be met by £3.4 billion in public
funding and an anticipated £700 million from the private sector.
The budget announced in March 2007 is now over £9 billion. It
includes a number of new costs and provisions which account for
much of the increase from the time of the bid, including the
Olympic Delivery Authority’s programme management budget,
contingency, tax and security.
The budget also includes a £6 billion increase in the public
funds required to fund the Games set against a significantly
reduced level of anticipated private sector funding (now £165
million). Over £1 billion of this increased funding is to meet the
Games’ potential tax costs and would therefore flow back to the
Exchequer. Today’s report states that the revised funding package
is sufficient to cover the estimated costs of the Games, with the
important proviso that the assumptions on which the budget is based
hold good.
The report found that the budget process followed since London
was chosen to host the Games has been thorough, and the judgements
and assumptions made by the Department for Culture Media and Sport
have been informed by detailed analysis and expert advice. There
are, however, remaining areas of uncertainty including design
specifications which have not yet been finalised, the impact of
construction price inflation and how potential suppliers will
respond to invitations to bid for work. The degree of uncertainty
is reflected in the high level of contingency (£2.7 billion) which
has been provided.
Sir John Bourn, head of the NAO, said
today:
"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."
The report makes recommendations to manage risk in relation to
the budget. Those which require immediate action are:
- Producing a statement of deliverables including the venues,
infrastructure and wider benefits expected in return for the £9
billion public finding, including time, cost and quality
assumptions
- Producing a more robust estimate of contingency
- Being clear about the timing of Olympic Delivery Authority
funding so it is not delayed in taking forward its programme
Notes for Editors
- Press notices and reports are available from the date of
publication on the NAO website, which is at www.nao.org.uk. Hard
copies can be obtained from The Stationery Office on 0845 702
3474.
- This is the second in a series of National Audit Office reports
on the preparations for hosting the London 2012 Olympic and
Paralympic Games. The first report on the preparations for the
Games set out the main areas of risk that need to be managed to
achieve the successful delivery of the Games. It can be downloaded
from www.nao.org.uk/publications.
- In recognition of the National Lottery’s contribution to the
Games, the Government and the Mayor of London have put in place
arrangements for sharing the profits that are expected to be
generated from sales of land and property following the Games. The
arrangements are set out in a revised memorandum of understanding
between the Government and the Mayor of London (27 June 2007), and
include an estimate of the receipts that the Government expects to
be available for repayment to the Lottery (some £675 million). The
precise value will be dependent on prevailing market values at the
time.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 850 staff. He
and the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 39/07
All enquiries to Neil Gadhok,
NAO Press Office: Tel: 020 7798 7020
Mobile: 07796 940746