London 2012 at risk of exceeding budget, watchdog warns

The National Audit Office said there was a "real risk" more taxpayer funding would be needed

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The 2012 Olympic Games could overshoot its £9.3bn budget unless "rigorous action" is taken to curb costs, the Whitehall spending watchdog has warned.

The National Audit Office said a doubling in estimated security costs meant there was a "real risk" more taxpayer funding would be needed.

On Monday the government said an extra £271m was needed for security guards.

Shadow Olympics Minister Tessa Jowell said despite it being a risky project she believes it will come in on budget.

Ministers insist more than £500m remains in unallocated funds for dealing with any further contingencies.

The National Audit Office (NAO) said the Olympic Delivery Authority (ODA) remained on course to complete its work on the Olympic Park on time and on budget.

However, on current projections, the spending watchdog said almost all the £9.3bn public sector funding package was likely to be required, with little margin for any further unforeseen costs emerging in the final eight months.

Sports minister Hugh Robertson said he had faith the financial targets would be met.

"Clearly any big infrastructure project is always going to be quite finely balanced but, as at today, we will be 95% complete in terms of build by Christmas and we still have half a billion pounds left in the contingency to cover all known risks. So I'm as confident as I can be as the minister that we're going to deliver on time and within budget."

But the head of the NAO, Amyas Morse, said "not everything is rosy" and the government had little room left for manoeuvre.

'Wafer thin'

"The government is confident that there is money available to meet known risks but, in my view, the likelihood that the Games can still be funded within the existing £9.3bn public sector funding package is so finely balanced that there is a real risk more money will be needed," he said.

Ms Jowell said: "It has always been a risky project: its scale, its complexity, and the fact that there is absolutely no leeway on the time by which everything has got to be complete, ready for next year in 234 days' time - and it will be.

"Hugh Robertson has said that he is confident that this will come in within the £9.235bn allocated when I was secretary of state, from public funds, for the Olympics and I believe that is still the case," she added.

At the time of the bid in 2005, the estimated total public cost of staging the Games was £2.4bn.

Continue reading the main story London 2012 - Begin your journey here

This was increased to £9.325bn in 2007 and then cut slightly to £9.298bn by the new government in May 2010.

The contingency fund stood at £2.75bn in 2007, but in May 2010 the ODA said this had fallen to £1.27bn and by February this year a NAO report revealed the fund was down to £974m.

Now the NAO has said, after the government's own estimate of meeting "assessed risks" was taken into account, there is £36m left in contingency funding.

The chairman of the Commons Public Accounts Committee, Margaret Hodge, said it was a very small amount for such a large project.

"What is left in the budget for contingency is wafer thin, at only £36m. For a project of this size with unknown risks and eight months remaining, that is a tiny amount of money," she said.

"Locog [The London Organising Committee of the Olympic and Paralympic Games] is likely to use all of its contingency funding and would also have to call on further government support if there are further cost increases."

Mr Robertson said the increase in security costs was due to a change in the international security situation and not being able to complete final planning until the competition schedule and design of the venues was known.

"When I started being minister there was no Arab Spring. No one really knows whether that's going to have a beneficial or adverse effect on our security."

Reputation 'at risk'

The NAO also raised its concern that the Olympic Delivery Authority's transport plan for the Games was behind schedule.

It said the 109 miles of London roads being used for the Olympic Route Network - including 35 miles of special lanes primarily for the use of athletes and officials - had still not been integrated with local transport plans.

Until the arrangements have been finalised, Locog and Transport for London will not be able to inform the public and businesses of the likely impact of the Games on the road network.

The spending watchdog also said issues related to cutting journeys on buses and the London Underground by non-Games users by an average of 13% a day - rising to 30% on peak days - still had to be resolved.

Continue reading the main story How 2012 budget has changed 2003: Consultants Arup put total cost of building and staging the Games at £1.796bn

2003: Tessa Jowell launches bid in May telling MPs it will cost £2.375bn - including a 50% contingency

2005: Bid succeeds in July with "prudent" estimate of preparing for games of £2.4bn

2007: Total budget, including a £2.75bn contingency, reaches £9.325bn

2010: In May the new government cuts the budget to £9.298bn and the contingency falls to £1.27bn

2011: In December the NAO says after the government's "assessed risks" are met £36m is left in contingency money

"The experience of spectators, visitors and Londoners in general would be diminished and the reputation of the Games put at risk if these issues were not sorted out," Mr Morse said.

The NAO added the need to find so many additional guards represented a "significant recruitment challenge" and the Home Office was now in discussion with the Ministry of Defence about using military personnel.

On Monday, the government said an estimated 23,700 security staff would be needed during the 2012 Games, which was more than double the initial estimate of 10,000 security personnel for venues.

It said the venue security budget was likely to rise from £282m to £553m, while the budget for ceremonies has also doubled, with an extra £41m allocation.

The Department for Culture, Media and Sport said the money for both increases would come from within the £9.3bn public funding budget for the Olympic and Paralympic Games after money was re-allocated from savings.

The budget is additional to the private funding budget raised by the Games organisers Locog.

The Olympics is set to be one of the UK's biggest security tests - a 64-day operation, from when the Olympic village opens on 13 July to the time the Paralympic village closes on 12 September, covering 34 venues across Britain.