John Healey (Financial Secretary, HM Treasury; Wentworth, Labour)

Clauses 65 to 68 deal with the status of activities relating to the Olympics. As part of London’s bid for the 2012 Olympic Games and Paralympics, the Government gave an undertaking to introduce the necessary legislation to exempt the London Organising Committee of the Olympic Games from corporation tax. Clauses 67 and 68 would do the same for the International Olympic Committee and for non-UK resident competitors and support staff. That is a recent innovation by the IOC, and all bid cities were required to give such tax undertakings.

Clause 65 and the supplementary provisions in its sister clause 66 will provide the exemptions required for the London organising committee as well as powers to enable that exemption, where appropriate, to be extended or restricted as the committee’s plans and arrangements for delivering the Olympics in 2012 become clear.

That is an essential part of a major event, not just for London, but the country, and to which I think that we are all looking forward. The exemptions are important also so that the committee can deliver the best ever Olympics, and do so in London.

Theresa Villiers (Shadow Chief Secretary To the Treasury, Treasury; Chipping Barnet, Conservative)

I welcome you, Mr. O’Hara, to the Chair. I shall speak briefly to clause 65, and not trouble the Committee by referring to the clauses linked to it. I shall take this opportunity also to put on the record my congratulations to the London bid team for its remarkable achievement in bidding successfully for the 2012 games. Given, as we have heard, that the provisions in the clauses were a requirement for the bid to have been made, there is no question but that the Government should honour the undertakings made in it.

Will the Financial Secretary tell us whether the clauses are expected to cost a significant amount? One would not necessarily expect the London organising committee or the IOC to raise significant revenue, but it would be useful to hear any information that he might have on that.

Will the Minister comment also on the points raised by the Institute of Chartered Accountants about whether the model for the exemption could be useful for charities as well? A number of complications with charities in general might make the model inapplicable, but I thought that it was a constructive idea from the institute, and I would welcome his thoughts on the matter.

I realise that it is not strictly related to the clause, but may I urge the Treasury to keep a watchful eye on the overall cost of the Olympics? I have raised that point with the Financial Secretary on the Floor of the House; it is of particular concern to my constituents in Chipping Barnet, who are London council tax payers who will pick up the bill for cost overruns, along with the lottery.

The budget for the London organising committee has increased already from £1.46 billion, envisaged last year when the London Olympics Bill went through the House, to around £2 billion, as confirmed by the Minister for Sport in Westminster Hall last week. He indicated that the increase was due to inflation, presumably over the  period until the games in 2012. However, that increase would put inflation at 33 per cent. over that 6-year period.

Furthermore, the heightened security needed following events on 7 July must surely have an impact on the overall cost of the games and could presumably drive it up further. I believe that the funding package on security is about £220 million, which was set before the 7 July attacks. The Government have said plainly that they will not meet the cost of overruns and that those must be shared by the lottery and London council tax payers. However, the Minister must be aware that if the games go badly over budget, there will be pressure on the Government to step in. For the sake of London council tax payers and to guard against future demands on the Exchequer, I urge the Government to do all that they can to ensure that the highest standards of procurement are applied to Olympic projects so as to avoid the cost overruns that have dogged many previous games.

If Olympic construction projects are late, we cannot just shift events to Cardiff, as we can the FA cup. I hope that we can learn lessons from Wembley and public procurement disasters such as the Scottish Parliament. I am told that the residents of Montreal are still paying for the games that it held over 30 years ago. Sydney’s budget was £1 billion, but its games ended up costing £2.8 billion, I believe. The Athens Olympics overran massively, with costs spiralling from £1 billion to £5 billion, much of which was due to security considerations, which of course will be more significant in London. I appeal to the Ministers here, as representatives of the Treasury and guardians of the public purse, to ensure that that sort of overrun does not happen in 2012.

Celia Barlow (PPS (Ian Pearson, Minister of State), Department for Environment, Food and Rural Affairs; Hove, Labour)

I welcome my right hon. Friend’s assertion that the Olympics will have a major effect on the whole country. However, I seek clarification of paragraph 13 of the explanatory note to the clause, which states that

“The International Olympic Committee included a requirement in the bid process for the 2012 Olympic Games and Paralympic Games that tax in the host country should not have a significant impact on the Games. As a result of the successful London bid the Government is committed to providing certain tax exemptions, including: LOCOG would be exempt from corporation tax; Withholding tax would not be levied on royalties, and other annual payments made to LOCOG.”

With regard to the regulations for LOCOG, competitors and staff, the receipt of tax relief gives the organisers a responsibility to ensure that these are not just London Olympics, but games for the whole of the United Kingdom.

The Olympic games will be held not only in London but in other parts of the country, as will training camps—the city of Brighton and Hove, of which my constituency is part, is hoping to play host to some teams. We need to ensure that the games are embraced by all the people of the United Kingdom, so these clauses must not be thought of as enabling the Government to provide subsidies for the capital from those who live outside London.

Will my hon. Friend clarify that the tax relief that is rightly to be given to those concerned with the Olympics, and which was part of the London bid, will apply also to providers situated outside London, such as sports venues in my area?

John Healey (Financial Secretary, HM Treasury; Wentworth, Labour)

My hon. Friend the Member for Hove (Ms Barlow) makes some important points about the role of the Olympics and their potential benefit not just for London but for the whole country. The body is, of course, the London organising committee but, as she rightly says, the games are for the whole UK and they must—and I hope will—be embraced by the whole UK. I wish Brighton and Hove all the best in its bid to host some of the teams that will be competing in the Olympics and Paralympics. Rotherham in South Yorkshire is hoping to do the same—[Interruption.]—and Bristol, too, the Paymaster General informs me. Clearly, there is a lot of interest across the UK in the prospect of the Olympics. The associated activities will reach well beyond the Greater London area, and the organising committee is well aware of that.

On the comments of the hon. Member for Chipping Barnet (Mrs. Villiers), it is difficult to estimate the tax cost in terms of potential revenue forgone. Secondly, the potential yield has not been factored in to the forecasts because if we had not won the bid for the games, there would be no potential tax yield from Olympic-associated activities. Without the exemptions that we are considering, the bid would not have been successful; they were a requirement of the bid application. On the more general costs, the hon. Lady is right. I can assure her that the Treasury will keep a close eye both on the general costs that concern her and on the standards of procurement throughout the run-up to 2012. I have no doubt that the Opposition will help with the scrutiny of the costs and the standards of procurement, as will the National Audit Office and Parliament as a whole.

There are two points about provision for charities. First, LOCOG is not a charity, so it does not benefit from the wide range of tax exemptions available to charities. Secondly, we need to appreciate the unique nature of the Olympic event. That is why we are putting in place unique tax arrangements. It is a once-in-a-lifetime opportunity for a country such as ours to host the games. To that extent, our provisions for the Olympics cannot be generalised to other events, nor are they appropriate for charities generally. I hope that on that basis, the Committee will allow the clause to stand part of the Bill.