Preparations for the London 2012 Olympic and Paralympic Games - Public Accounts Committee Contents


1  The public sector costs of the Games and their legacy

1. The 2012 Olympic and Paralympic Games will open on July 27. The Government's preparations and management of the £9.3 billion Public Sector Funding Package are led by the Department for Culture, Media and Sport. The Department works with a wide range of bodies including the Olympic Delivery Authority, which is responsible for the construction of new venues and infrastructure required for the Games, and LOCOG, which is responsible for staging the Games.[2] The Olympic Delivery Authority's management of its construction programme has been exemplary and it remains on track to deliver its venues and infrastructure programme on time and within budget.[3]

2. The Department remains committed to delivering the Games within the £9.3 billion Public Sector Funding Package (PSFP), but the Funding Package has had to absorb significant additional costs, including a £271 million increase in the cost of securing the Olympic venues during the Games, and £41 million for the opening and closing ceremonies.[4] Consequently, £528 million of contingency remains to cover the potential impact of risks between now and the Games.[5] The Department estimates that the financial impact of remaining cross-programme risks could be anything from £127 million to £1 billion, but it has since made clear that it estimates it will retain over £100 million[6] of headroom in the PSFP above assessed risks.

3. There are other significant public sector costs which do not fall within the £9.3 billion Public Sector Funding Package, but which take the total estimated cost to the public purse of delivering the Games and their legacy to at least £11 billion. These costs include £766 million to purchase the Olympic Park land, around £826 million for legacy projects and expenditure on Games-related activities by Government Departments. [7]

4. LOCOG is intended to be privately funded, through sponsorship, merchandising, ticket sales and contributions from the International Olympic Committee.[8] LOCOG has done well so far with generating revenue, particularly by raising £700 million through sponsorship.[9] LOCOG has to raise a further £200 million to reach its revenue target. LOCOG expects £130 million to come from the sale of remaining tickets and told us that it is absolutely certain that it will achieve this.[10] However, LOCOG's budget is very finely balanced: after taking account of the cost of meeting expected risks, it has only £5 million of headroom remaining. The Government is obliged under guarantee to meet any shortfall in LOCOG's budget. In addition to its own £2.2 billion budget, LOCOG is spending £867 million from the Public Sector Funding Package - the majority of which is for venue security - on behalf of the Department for Culture, Media and Sport and the Home Office.[11]


2   C&AG's report, paragraph 2 Back

3   Q1; C&AG's report, paragraph 5 Back

4   Qq23, 24, 37; C&AG's report, paragraph 9 Back

5   Qq4, 10 Back

6   Ev 28 Back

7   Qq18-23, 177; C&AG's report, paragraph 5.5  Back

8   Q128; C&AG's report, paragraph 5.8 Back

9   Qq139-140; C&AG's report, paragraph 5.9 Back

10   Qq130, 139 Back

11   Qq127-128  Back


 
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© Parliamentary copyright 2012
Prepared 9 March 2012