The spiralling cost to the taxpayer and secrecy surrounding how the money will be spent threaten the enthusiasm that greeted the capital's victory over Paris in the race to host 2012, politicians on the assembly's Budget Committee warn in a document seen by The Observer.

The £8bn figure is considerably higher than the £5bn revised budget for the event produced just last week. It is based on evidence given by official bodies and key figures involved in funding and delivering the event, such as the Olympic Development Authority. There have also been recent revelations about how the cost of providing security and regenerating London's East End for 2012 is soaring.

The Budget Committee will meet this Wednesday to air their fears and demand far greater openness from Olympic leaders about the financing of 2012. Its report says that speculation about an extra £250m having to be found to cover VAT on building the venues for 2012 'adds urgency to our call for more public information'.

Assembly members say the £2.4bn figure was at best unrealistic and at worst an attempt to appeal to both the public and the International Olympic Committee, which awards the Olympics.

Brian Coleman, the Assembly chairman and a Conservative member, said last night: 'We were told the £2.4bn figure was robust and rigorous. It turns out that it was a back-of-the-envelope fantasy job. The question now is: who pays?'

Assembly members yesterday said they fear that London's Games could end up being the most expensive ever. Tessa Jowell, the Culture Secretary and Olympics Minister, is likely to face tough questioning on Tuesday when she gives evidence at the Commons Culture, Media and Sport Select Committee's inquiry into 2012.

Assembly members fear that Londoners could end up subsidising house-building in the city's East End through the £625m Olympic precept on their council tax bills, that 2012 will swallow up the capital's entire budget for economic development.

But Jowell last night said the public and media should distinguish between the narrow costs of putting on 2012 and the much larger expense of regenerating a huge swathe of the East End alongside the building of the Olympic venues.

'People should bear in mind that the assembly budget committee haven't factored into their report the large sums of money we will recoup from our investment now from selling land and, for example, turning the 2012 International Broadcast Centre into offices and light industrial units', said Jowell. 'We are conducting a fundamental review of the costs that were carefully constructed as part of the original bid to take account of changes since we won the bid, such as increases in commodity prices, the increased cost of security since the 7/7 bombings and our bigger ambition now to realise the prize of regeneration.'