New Clause 1 — Limit on Power of Greater London Authority to Raise Money from Council Tax for Expenditure on London Olympics

Orders of the Day — London Olympics Bill – in the House of Commons at 4:33 pm on 6th December 2005.

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Votes in this debate

'The Greater London Authority shall not raise more than £625 million from the council tax for expenditure in connection with the London Olympics.'. —[Hugh Robertson.]

Brought up, and read the First time.

Photo of Hugh Robertson Hugh Robertson Shadow Minister (Culture, Media and Sport)

I beg to move, That the clause be read a Second time.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

With this it will be convenient to discuss amendment No. 3, in page 23, line 35 [Clause 33], at end insert—

'(2A) The Greater London Authority shall not raise more than £625 million from the council tax for the purpose of exercising the function under subsection (1).'.

Photo of Hugh Robertson Hugh Robertson Shadow Minister (Culture, Media and Sport)

The amendment and the new clause were tabled in my name and that of Mr. Foster.

Let us be very clear about what is involved here. When a bid was first considered, the Government and the Mayor agreed a funding package of £2.375 billion to help meet the costs of staging the Olympics in London in 2012. That figure was made up of £1.5 billion from the lottery, 50 per cent. of which will come from existing sources and 50 per cent. from the new Olympic lottery games, £250 million from the London Development Agency and £625 million from London council tax payers.

Photo of Don Foster Don Foster Shadow Secretary of State for Culture, Media and Sport

I apologise for interrupting the hon. Gentleman so early in his speech and thank him for indicating that I support the amendment and the new clause. Will he confirm that in the agreement with the Mayor of London, the £625 million to which the hon. Gentleman has referred was made up of £550 million and a further £75 million, which may be drawn on only if it is necessary do so?

Photo of Hugh Robertson Hugh Robertson Shadow Minister (Culture, Media and Sport)

The Olympic surcharge will start in April 2006, and Londoners will pay between £13.33 for a band A dwelling and £40 for band H. Some 69 per cent. of Londoners are in bands A to D and they will pay between £13.33 and £20.00, and 31 per cent. will pay between £24.44 and £40.00.

As Conservatives, we entirely support the principle that Londoners should make a contribution to the financing of the games. There are four main reasons for that. London is the host city, so it is likely to benefit most from tourism and promotion; London businesses will undoubtedly benefit enormously; the east end of London will be regenerated; and Londoners will have the world's greatest sporting event on their doorstep. It is therefore perfectly reasonable that they should make a financial contribution over and above the remainder of the United Kingdom. In short, we accept the figure of £625 million and signed up to it at the time of the bid.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Party Chair, Liberal Democrats 4:45 pm, 6th December 2005

The hon. Gentleman is obviously right about his party. He will know that others of us who participated in the same election took the same position. Londoners were very happy to make a contribution over and above that made elsewhere, but they kept asking the question to which the amendment and new clause relate: will it be limited to that amount or open-ended? Unless we made it clear that it should be limited, they were not nearly as enthusiastic.

Photo of Hugh Robertson Hugh Robertson Shadow Minister (Culture, Media and Sport)

I thank the hon. Gentleman for those comments. I think that he will reassured by what I am about to say.

It is fair to say that although we accepted the £625 million cost right from the outset, we—and, clearly, the Liberal Democrats—have had concerns about the possible effect on London council tax payers. The new tax will simply take the form of a larger levy on council tax bills, so it is not entirely transparent. There is no automatic cut-off after 2012. The extra money is not specifically ring-fenced for the Olympics, in obvious contrast to the congestion charge, where revenue is ring-fenced for value-for-money transport projects. There is no guarantee that the money will not be used to cross-subsidise funding shortfalls elsewhere—for example, if not enough tickets are sold.

Those initial concerns have been given further impetus by a number of factors that have become apparent in recent months and that have changed the position substantially since the initial plans for London 2012 were drawn up. First, we now know that previous games have substantially overrun their budgets. Local tax payers in Montreal are still paying off debts incurred at the 1976 Olympics. Sydney's budget of £l billion eventually came to £2.8 billion. Athens' budget of £l billion eventually became, as far as we know, £5 billion.

Secondly, security costs are likely to soar post-7 July. There cannot be a single Member of this House here today who genuinely believes that the international security situation will improve in the near future. If anything, it is likely to get worse.

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs

When the Culture, Media and Sport Committee, on which I served, first considered security, everybody was aware not only of the possible threat in Athens, where British security forces and police played an important role in ensuring the security of the games, but of the fact that there was already a heavy underwriting in terms of security measures. I do not think that, of itself, July this year will have made a significant difference. Does the hon. Gentleman have specific arguments on that?

Photo of Hugh Robertson Hugh Robertson Shadow Minister (Culture, Media and Sport)

Yes, indeed I do. If one looks around London, it is fairly self-evident that security has been tightened immeasurably since 7 July, and rightly so—every Member would support that. I think that the security allowance in the Bill is £200 million. The Minister will correct me if I am wrong.

Photo of Hugh Robertson Hugh Robertson Shadow Minister (Culture, Media and Sport)

Given today's security situation, I cannot see how London can be kept entirely secure within that budget.

Thirdly, the Mayor has been commendably honest about the fact that his key aim is to regenerate the east end of London. That is not entirely compatible with the Government's priority of delivering the 2012 Olympics on time and to budget as the best games ever. Those conflicting priorities will inevitably put pressure on the budget. Fourthly, the cost of acquiring land in the lower Lea valley, and therefore of site assembly, has risen substantially since we won the bid on 6 July. Finally, as scrutiny of the financial markets shows, inflation in the construction sector is running at about 7 per cent. as a result of rising energy prices and the increased cost of raw materials. Natural disasters in the USA and Asia, allied to high demand in China, have rendered the original 3 per cent. prediction unworkable.

All Members know of the concern already felt by many of their constituents about rising council tax bills. They affect everyone, but particularly the elderly—who have no way of increasing their income to cope—and the vulnerable. We were happy to accept the original £625 million figure, although we had some worries about the lack of accountability. Since the plans were drawn up, however, the five factors that I have listed have led us to believe that Londoners should not be left with an open-ended commitment. Accordingly, I believe that the time has come to introduce a formal mechanism to ensure that Londoners receive a measure of protection.

Let me end with two pleas. First, I ask all London Members to consider a new clause that simply gives a statutory basis to the Government's own estimate of the cost of the games to council tax payers, and to support it. If they do not do so, they will risk inflicting a considerable extra bill on their constituents.

Photo of Andy Reed Andy Reed PPS (John Healey, Financial Secretary), HM Treasury

So far, the hon. Gentleman has told us why London council tax payers should not make a larger contribution. If London council tax payers did not make the contribution, someone else would have to do so. Which of the other funding bodies does the hon. Gentleman think should do it?

Photo of Hugh Robertson Hugh Robertson Shadow Minister (Culture, Media and Sport)

The hon. Gentleman is right, but it is difficult for me to give him an answer. Every time we have asked the question, the Minister has said—as I expect him to say in 20 minutes' time; indeed, he told me that he would do so—that the budget for the games was drawn up according to the most advanced formula ever and that there would be no cost overruns. If that is the case, let us flip the argument over—why should there not be a cap?

Photo of Andrew Pelling Andrew Pelling Conservative, Croydon Central

Mary Reilly, chair of the London Development Agency, said in the Financial Times that the estimate of the cost of cleaning the land on which the games would take place had already doubled, which means an increase of hundreds of millions of pounds.

Photo of Hugh Robertson Hugh Robertson Shadow Minister (Culture, Media and Sport)

Indeed; Mary Reilly made that point when she appeared before the Select Committee two weeks ago.

My second plea, on which I have touched already, is to the Minister. Although the new clause has cross-party support, it is perfectly possible that the Bill will be defeated in the other place, which will delay it. We are, after all, simply trying to give the Government's own calculations a statutory basis. Therefore I do not hesitate to urge the Minister and the House to accept the new clause.

Photo of Andy Reed Andy Reed PPS (John Healey, Financial Secretary), HM Treasury

Having heard what Hugh Robertson had to say, I have an opportunity to go a little further. I appreciate that many London Members, among others, will have a view on the level of council tax payments to the fund, but, as I said before, if the money does not come from London council tax payers, where is it to come from? The new clause makes no mention of that, which is why I offered the hon. Gentleman a chance to tell us.

I am quite confident about the £2.3 billion package, and I am sure that the Minister will confirm it. The figures that make up the package, which had cross-party support when we went to Singapore, represent a built-in flexibility based on the understanding that projects such as this always involve a cost overrun. The package assumes a potentially large overrun and builds in flexibility at a level that I consider acceptable.

I hope that the new clause will be rejected on the basis that, as I have said, it does not tell us where the rest of the contribution will come from. The hon. Gentleman knows that I am already anxious about the amount that will have to come from existing lottery funds. I should be more anxious if, as a result of the new clause, more money had to come from funds for grass-roots sport or other lottery contributions.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

The hon. Gentleman, like me, is worried about the amount that we are raising from the national lottery to fund the Olympics. I suggest, however, that instead of focusing on the new clause, he should focus on the Minister's reassurances that the £625 million is an accurate figure that will not be exceeded.

Photo of Andy Reed Andy Reed PPS (John Healey, Financial Secretary), HM Treasury

The Opposition have tabled a new clause and it is only right for us to respond. Indeed, I am delighted to do so.

There are other questions about funding. We know that 50 per cent. of the £1.5 billion from the lottery will come from existing lottery funds, and the other 50 per cent. from the new lottery game. Another £250 million is to come from the London Development Agency. It is bound to be difficult to raise the desired amount. So, if the money is not going to come from the London council tax payer, which other funding body will it come from? It is absolutely necessary that we have that information before we vote on the new clause.

Photo of Adam Afriyie Adam Afriyie Conservative, Windsor

The estimate of the cost of the Olympic games seems to have been made by the Treasury. If the new clause were reworded so that any cost overrun would be spread across the whole nation, or was met in some other way, would the hon. Gentleman be more inclined to support it?

Photo of Andy Reed Andy Reed PPS (John Healey, Financial Secretary), HM Treasury

I would be more inclined to support anything that went a bit further than this proposal, to be honest. As a non-London Member of Parliament, it would be dead easy to stand here and say, "It's great. The London council tax payers will pay", but I recognise that we will all benefit from the London Olympics in some way, particularly those of us in Loughborough.

Photo of Pete Wishart Pete Wishart Opposition Whip (Commons), Shadow Spokesperson (Cabinet Office), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (International Development)

The chances of the London Olympic games coming in on budget are about the same as Scotland's chances of winning the World cup. There will be an overspend, and I share the hon. Gentleman's concerns about how it will be met. Will the Minister assure us that it will not come from the lottery? With £1.5 billion coming out of the lottery in the next 10 years, it will have suffered enough.

Photo of Andy Reed Andy Reed PPS (John Healey, Financial Secretary), HM Treasury

Obviously, I cannot give the hon. Gentleman that assurance, but I am sure that the Minister is listening. The hon. Gentleman and I have shared many a debate in the lead-up to the successful Olympic bid, and expressed our concerns about the potential impact on grass-roots sport of the Olympics needing new money from the existing lottery funds. I am sorry that the hon. Gentleman has such a pessimistic view of Scotland's future, although I am not sure whether he meant the football World cup. I am sure that his constituents will be delighted to hear of his pessimism, however. I hope that Scotland does well in future world cup competitions, whatever the sport, but perhaps it will have a rethink in regard to the participation by the Scottish Football Association, which is denying not only its senior men a place in the 2012 competition, but the other teams that would benefit from joining England and possibly Wales as part of a UK team.

I had meant to make a very short contribution to ask for further information, but I seem to have attracted a number of interventions. I cannot support the new clause because it makes no mention of where the additional money would come from in the very unlikely event of costs to the lottery bill and the Olympic bill overrunning.

Photo of Don Foster Don Foster Shadow Secretary of State for Culture, Media and Sport

I am delighted to follow Mr. Reed, because he has teased the House with his suggestion that, if someone were to tell him where the overrun money would come from, he could support the new clause. Perhaps I can give him an answer to his question in a second, and if that is satisfactory to him, we shall look forward to seeing him in the Division Lobby shortly.

I was grateful to Hugh Robertson for mentioning the Liberal Democrats' support for the new clause. It should have come as no surprise to him that we would support it, however, because my hon. Friend Simon Hughes made it clear, back in the run-up to the June 2004 mayoral election—in which he was an extremely good candidate for the Liberal Democrats—that, while the Liberal Democrats would welcome the contribution of the people of London on account of the fact that they would be among the main beneficiaries of the Olympic and Paralympic games, that contribution should be capped so that Londoners knew where they stood.

The hon. Member for Loughborough shares with me, as the Member for the wonderful city of Bath, the certain knowledge that our constituents will benefit enormously from the games because we—along with Sheffield and other cities—have some of the premier sporting facilities in this country, which will no doubt be used by the visiting and home nation teams in the preparations for the games. That might offer a bit of a clue as to where the contribution might come from, should there be an overrun.

Before discussing the possibility of such overruns, let me say that I joined the Minister, the Secretary of State, the leader of my party, the leader of the Conservative party and the Prime Minister in putting up my hand and saying to the International Olympic Committee that we believed that our bid was backed by an extremely robust financial plan. We made it clear that we were so confident that we had learned the lessons from previous Olympics that we were certain that an overrun—which others described as probable—was not likely to happen. Nevertheless, the hon. Member for Loughborough challenges us to say where the money should come from in the event of an overrun. If he wants the answer, he should examine what we told the IOC when we bid for the games in the first instance, because our bid document provides the answer.

Our full bid statement made it clear that we were committing the United Kingdom Government to be the ultimate guarantor in the event of any shortfall, including any shortfall in the operating budget of the London organising committee for the Olympic games. When the IOC evaluated our submission, it said clearly:

"The UK Government has guaranteed it would act as the ultimate financial guarantor to cover any shortfall from the Games."

It went on to say—as I suggested, I am not surprised—that the

"budget appears to be reasonable and achievable".

The position is therefore clear. Let me say to the hon. Member for Loughborough that I am confident that there will be no overrun or budget shortfall. Should that eventuality occur, however, it is not right for London council tax payers to pay more than what appears to me to be their fair share.

I suspect that, in a minute, the Minister will tell us that if we remove the responsibility from London council tax payers, that will lift any pressure on the Greater London authority and the Mayor to bear down on costs. Clearly, that is not the case. As I said in an intervention on the hon. Member for Faversham and Mid-Kent, London has pledge £550 million, with an extra £75 million to call on if needed. Clearly, it is in the interests of the Mayor of London and all GLA members to ensure that even that £75 million is not called on. Within the deal, there is a mechanism to exert downward pressure on costs. It is perhaps also worth reflecting that the Government are not currently making a direct contribution to the Olympics and Paralympics, but are seeking that money from all sorts of other bodies. At the same time, however, the Government will generate significant revenues as a result of the games coming to this country. Later, we will debate one source of revenue—the VAT on the Olympic lottery game.

Photo of Susan Kramer Susan Kramer Shadow Minister, Treasury, Shadow Spokesperson (Business, Innovation and Skills), Liberal Democrat Spokesperson (Business, Innovation and Skills) 5:00 pm, 6th December 2005

Does not my hon. Friend agree that as Londoners are sharing the risk of overruns, a portion of the revenue gains that eventually come to the Treasury ought to flow back to London to cover Londoners' investment in the games? The Treasury is a winner, but it ought to be willing to share some of that win and cover London's costs, too.

Photo of Don Foster Don Foster Shadow Secretary of State for Culture, Media and Sport

My hon. Friend makes an interesting point, but answering it would be beyond my pay grade. My hon. Friend Dr. Cable might have a few comments to make in respect of that proposal, and I suggest that she take the issue up with him, rather than persuading me to risk his ire by responding.

One thing is absolutely clear: London council tax payers still have a mechanism to exert that financial pressure and to keep the costs as low as possible. The Government, who are currently not making a contribution, but will gain considerable revenue as a result of the games, also demonstrate that they, too, will exercise pressure to keep the cost down. That is shown by the welcome decision by the Secretary of State, the London organising committee for the Olympic games and others to reject the proposals for the swimming pool complex. Evidence therefore already shows that measures are being taken to keep the price down.

It would be wrong, however, to put ourselves in a position whereby London council tax payers are left in uncertainty about their financial responsibilities. They are rightly being asked to contribute to the cost of the games because of the significant benefits that London will gain, but it is equally right, as the new clause proposes, to cap the contribution so that London tax payers know what they are paying for and for how long. That should be the end of the matter.

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs

I am pleased to follow Mr. Foster. However, I noted that he referred to Simon Hughes as an especially fine former mayoral candidate but did not describe Susan Kramer in the same terms. I do not know whether there is some split in the Liberal Democrat party or whether the hon. Member for Bath is trying to curry favour with his president.

As Hugh Robertson said, the new clause is predicated on the belief that there will a cost overrun. He gave various reasons for that, such as land values and added security, and argued that those factors have not yet been properly costed. Pete Wishart denounced his nation's sporting prowess in declaring that there would be an overrun.

If one considers every other country in the world that has held the Olympics, one realises that, when Opposition politicians tried to make political capital by starting to talk about overruns, they made them a political inevitability. The Select Committee on Culture, Media and Sport examined all those countries in detail and found that that was the case. I therefore hope that the debate will not perpetuate the canard that the games must necessarily overrun. The bid model was put together on an extremely robust financial basis and tight analysis was made not only of security and land value issues, and how they might change, but—perhaps most significantly—London Transport's financial needs.

At one point, inadequate provision had been made to ensure that public transport needs in London would be met, but, following the first IOC visit, when its members commented on that, substantial and sufficient adjustments were made.

Photo of Richard Ottaway Richard Ottaway Conservative, Croydon South

I accept the hon. Gentleman's point, but if there is an overrun, how would he feel if the people of Rhondda were asked to chip in to pay for it?

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs

I was about to deal with that point. I suspect that there would not be much support in the country for taking more money out of lottery funds in the case of an overrun, not least because, if we have no decently funded Olympic athletes, there is not much point in holding the Olympics in this country. I hope that Rhys Jones, the grandson of my predecessor but two, Alec Jones, will be an Olympic athlete in the triathlon in the 2012 Olympics. I hope that there will be a proper funding stream for elite athletes, including those in the Rhondda and the rest of Wales, in Scotland and in Bath. That is why I do not support raiding the lottery.

I do not want a significant extra amount of money to be charged to the taxpayer in the case of an overrun. However, it is wrong to establish a fixed figure as the fair share, which the hon. Member for Bath mentioned, that the London taxpayer should pay as opposed to a share—in other words, a percentage. If there is an overrun, I believe that London taxpayers should pay a fair share of it, rather than a fixed amount, which is proposed in the new clause.

I say to the hon. Member for Faversham and Mid-Kent that it is, I think, the first time that I have heard an amendment spoken to on the basis that the other place will implement it anyway. That is an undemocratic and rather strange way to proceed with our business. It is an important principle that we have our debates in this place first and resolve them, and then subsequently reflect on what the other place decides to do or not to do. We have heard several times since the general election that the Conservative party and the Liberal Democrats say that all the previous conventions on how we do business between this place and the other place have been swept aside. I thought that the hon. Gentleman was slightly more sweeping today.

Photo of Hugh Robertson Hugh Robertson Shadow Minister (Culture, Media and Sport)

I was simply making the point that if there is not some movement, and bearing in mind that there is cross-party support, there is a danger that their lordships will overturn that which is proposed. Bearing in mind that there has been cross-party support throughout the Bill's passage, I seek to avoid that opportunity.

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs

I still think that the hon. Gentleman is coming remarkably close to threatening that whatever happens in this democratically elected Chamber, the Opposition will seek to overturn the will of this Chamber in another place. That is unfortunate. The argument has not been made for the new clause and I hope that it will fall.

Photo of Mark Field Mark Field Shadow Financial Secretary

I endorse the comments of my hon. Friend Hugh Robertson and agree with what he is trying to achieve through the new clause.

Many of us who are sports lovers in London have faced the difficulty of the half-hearted and perhaps lukewarm support for the Olympic bid. I was delighted to see the scenes on 6 July, but I have expressed concerns over many years about the costs of the Olympic games. I have always felt that the Mayor of London, Ken Livingstone, is likely to issue a blank cheque. I put that proposition to the Secretary of State a year or two ago, and it was pooh-poohed, but I fear that that will be the reality.

Overall expenditure is supposed to be £2.375 billion. A robust case was made by Chris Bryant that there will not necessarily be an overrun. He is right to say that we should not start in a negative frame of mind, but experience shows that there have been significant overruns. Clearly, we hope that there will be great commercial gains, which will ensure that quite a lot of money comes into central coffers, but we should recall that Sydney's cost overrun increased almost threefold from £1 billion to £2.8 billion. That must be of great concern to us all—Londoners and everyone else in the United Kingdom—because it is in all our interests not to have an overrun.

The big issue is that, in essence, London council tax payers will be subject to a massive multiplier effect. The overall costings of £2.375 billion presume £1.5 billion of lottery funding. I entirely understand what Pete Wishart said but I do not necessarily share his reluctance to see the cap lifted.

At present, it is suggested that £250 million could come from the London Development Agency and £625 million from the London council tax payer. If the overall cost is not £2.375 billion and is, let us say, £3 billion, that will in essence be equivalent to a 100 per cent. multiplier effect on the London council tax payer. That is how the additional £625 million will be raised. It is to be hoped that we will not have a Sydney-type massive cost overrun of perhaps £2 billion, because that additional £2 billion would fall on London council tax payers to pay. That would be entirely unacceptable. London council tax payers would effectively be paying for the blank cheque to which I referred in the House only about 18 months ago.

Photo of Richard Ottaway Richard Ottaway Conservative, Croydon South 5:15 pm, 6th December 2005

May I assist my hon. Friend with his figures? The back of a fag packet calculation that I have done is that an overrun of £0.5 billion would add £140 to the bill for every band D household.

Photo of Mark Field Mark Field Shadow Financial Secretary

I thank my hon. Friend. I hope that he is not smoking those fags either in this place or anywhere else; perhaps he is still entitled to do so. That is the nub of the problem. In essence, in London, the risk is that we will find ourselves with an enormous burden for many years to come. Already concerns have been expressed by hon. Friends and, I think, Labour Members about the costs that are likely to be imposed upon London taxpayers. As it is the cost is likely to be £20, £30 or £40 a year over 20 years. It could be considerably worse given the multiplier effect to which I have referred.

I notice that my hon. Friend Mr. Pelling is no longer in his place but he rightly referred to the fact that the chairman of the London Development Agency, Mary Reilly, has admitted that the costs of preparing the Olympic site could double from the planned £478 million to £1 billion. If that became a cost overrun, rather than being dealt with by the budgets that have been agreed, that would, once again, penalise council tax payers in London fairly soon. Those are great concerns.

Anyone who has been to the Lower Lea valley site will have seen that it is greatly contaminated. It is difficult to estimate the likely cost of cleaning that land and ensuring that it is fit for purpose. Inevitably, there is always some optimism in putting forward a strategy and I accept that a robust financial case was made—it was not just a lot of cascading figures—but, very quickly, however robust the financial case, things can go horribly awry. It looks as though the cost of clearing up the site is likely to be significantly more than the £478 million that was mooted at the outset.

Thank you, Mr. Deputy Speaker, for allowing me to make this brief contribution. My hon. Friend the Member for Faversham and Mid-Kent has made a sensible suggestion and I hope that the House will seriously consider it. I am particularly glad that it has cross-party support; Mr. Foster supports it. It is wrong that London taxpayers should suffer from the potentially ruinous multiplier effect to which I have referred. There may be some merit in the comment of Chris Bryant that the £625 million should not be the cap if there were to be a massive cost overrun. I am sure that London taxpayers would be happy to pay their share, but the reality is that, with a cost overrun, they will pay 100 per cent. of every pound in excess. That would not be the right way forward.

Photo of Pete Wishart Pete Wishart Opposition Whip (Commons), Shadow Spokesperson (Cabinet Office), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (International Development)

Curiously, I find myself joining the Minister in opposing the new clause. I find absurd the suggestion that Londoners and London MPs should simply walk away if all this goes financially pear-shaped, which a number of us anticipate, and leave the rest of us in the United Kingdom to pick up the pieces. London has secured the most extraordinary and fantastic regeneration programme for the east end. It is about to receive the most generous, extravagant input of public money through the lottery to pay for the bulk of the games and for that regeneration. Therefore, London cannot simply walk away when those financial shortcomings come home to roost and expect the rest of the nation to pick up the pieces. That would not be fair, right or proper.

Photo of Richard Ottaway Richard Ottaway Conservative, Croydon South

Can the hon. Gentleman remind the House how much the Scottish Parliament cost?

Photo of Pete Wishart Pete Wishart Opposition Whip (Commons), Shadow Spokesperson (Cabinet Office), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (International Development)

I am grateful to the hon. Gentleman for mentioning that. I will refer to the Scottish Parliament in my speech and give him the full figures for the extraordinary increase in its cost. [Interruption.] If the hon. Gentleman will just be patient, I will come to that.

In this debate, I have heard London Members saying that Londoners will continue to pay for the games through the council tax. Londoners are paying for a sizeable proportion of the London Olympic games and that is right and fair because it is London that stands to gain from all the fantastic regeneration. I suggest that £625 million is a snip to pay for what will be the largest regeneration programme in the next 10 years, anywhere in the world. It is cheap at half the price. I will now answer the question from Richard Ottaway. The total cost of the Scottish Parliament was £450 million, so now we have compared costs.

I could go on about how the Olympics is part of a general package and general process that always seems, inevitably, to secure large infrastructure projects for London. The rest of the UK continues to pay for that. London is the richest, most prosperous part not just of the UK but of the whole of Europe. I shall spare you from any more of that argument, Mr. Deputy Speaker, because I am sure that you have heard it being kicked around before during debates in this House; indeed, it has been discussed for the past 10, 20 or 30 years.

The benefits for London of this regeneration are fantastic. The regeneration of east London alone will create more than 3,000 jobs, and its local economy will benefit by £70 million. It has been concluded that London could make up to £500 million from the tourism legacy—an extraordinary, incredible figure. Given these fantastic legacies, London should be embarrassed at the suggestion that it should walk away from its responsibilities if things go pear-shaped. If things do go wrong, it will not be the fault of the taxpayer or the lottery player; nor will taxpayers elsewhere in the United Kingdom, or lottery players outwith the metropolitan area, share in this legacy. London alone will benefit.

Photo of Jo Swinson Jo Swinson Opposition Whip (Commons), Shadow Spokesperson (Culture, Media and Sport), Liberal Democrat Spokesperson (Culture, Media and Sport), Liberal Democrat Whip

Does the hon. Gentleman not agree that although the Olympic games will obviously benefit London greatly, his constituency, mine and all other Scottish constituencies will also benefit greatly from the sporting opportunities provided for young people? I also hope that the Scottish Executive and Scotland will make the most of the tourism opportunities, and get people to go north of the border once they have been to the London Olympics.

Photo of Pete Wishart Pete Wishart Opposition Whip (Commons), Shadow Spokesperson (Cabinet Office), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (International Development)

Absolutely. There is genuine enthusiasm in Scotland for an Olympic games, and there is massive enthusiasm for a separate Scottish Olympic team—an idea that I hope the hon. Lady supports.

Photo of Pete Wishart Pete Wishart Opposition Whip (Commons), Shadow Spokesperson (Cabinet Office), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (International Development)

Some 78 per cent. of the Scottish people believe that we should have our own Scottish team in the 2012 Olympics. I hope that the hon. Lady will join me in trying to achieve what would be a fantastic addition to the London games. [Interruption.] I am sure that the Minister agrees and that he would love to see a Scotland team competing at the London games.

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs

The hon. Gentleman has already decried his Scottish sporting prowess, so there is no point in his trying to rescue his reputation. Lots of people working on the site of the new Wembley stadium come from south Wales, Yorkshire and other places throughout the country. Surely the important point is that the industry that will build the Olympic site will not be just a London one. The whole community will benefit and if the hon. Gentleman cannot see that, he needs to get some better political spectacles. [Interruption.]

Photo of Pete Wishart Pete Wishart Opposition Whip (Commons), Shadow Spokesperson (Cabinet Office), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (International Development)

As the hon. Member for Croydon, South suggests from a sedentary position, Estonia, Lithuania and other parts of eastern Europe will also provide labour for this project; all the best of luck in that regard.

This new clause is about what will happen if there is overspend, and as sure as night follows day, there will be; it is living in cloud cuckoo land to believe otherwise. As we have heard, the Sydney games overran by twice the projected amount, and the Athens games—the last to be held in Europe—overran by five times the original figure. It is almost too far-fetched to believe that there will be no overspend for the 2012 games.

We need to look at the UK's record on delivering these large infrastructure projects, and it is utterly appalling. This House decided that the Scottish Parliament should cost £50 million; it came in at 10 times more. The taxpayer is still paying for the absurdity that was the millennium dome, and the Jubilee line extension is another testament to how overspends are becoming a feature of these massive infrastructure projects. I am desperate to find an answer to the question of who should pay for this overspend, should it occur and the new clause and amendment be accepted. Most important, what is the fairest way to finance it, should that prove necessary?

The Government are committed to financing any overspend, and although the Minister made it clear in Committee that they are in charge on this issue, he was very coy about how such overspend should be met. I should like to hear a little more on that. I again appeal to him: please do not touch the lottery any further. Some £1.5 billion will come from the lottery in the next 10 years, and our grass-root sports, charities and good causes will experience real pain and suffering. Please leave the lottery out of this one. If a shortfall should occur, it would be unsustainable for London to draw any more money from good causes and charities.

London knew what it was getting into when it bid for these games. It knew of the recent experience of games held in Europe; it knew about the examples of Athens and Sydney; it knew that there had been overspends. It should have read the small print on the tin, saying, "Shares in Olympics can go down, as well as up." All this was overlooked in the general hype and the enthusiasm for bringing the games to London. We all heard about how great the games would be for London and for the rest of the UK. If everything goes well and London benefits from the games, it will be great, but if it all goes pear-shaped, it should not be left to the rest of the United Kingdom to pick up the tab. I oppose the new clause and amendment and I ask all fair-minded hon. Members to do the same.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Party Chair, Liberal Democrats

I rise to support my hon. Friend Mr. Foster and Hugh Robertson. I wish to add a couple of points that may persuade many hon. Members, and not only those from London, of the merits of the case. The House may be aware that I am a great enthusiast for the Olympic games. I was really keen that we should make a bid and before the mayoral elections, I made it clear that I supported the Government—as did the Conservative candidate. In case Chris Bryant has another go at my hon. Friend Susan Kramer who was my predecessor as candidate—and an excellent candidate she was, too—I should make it clear that she and our party in London also believed that it was right to support the games.

Concerns were expressed, as might be expected in our capital city, not only in political circles but by ordinary members of the public, that the project might run out of control financially. Therefore, we watched with interest in the last Parliament—before the last mayoral election—as the negotiations went on between the Mayor of London, Ministers and others about the funding package. The negotiations produced a split between a London contribution, a lottery contribution and a London Development Agency contribution. It was also proposed that the games themselves, once everything had been built, would be self-financing.

I wish to give a couple of reasons for supporting the amendment. First, it is of course the case that people in Loughborough and Bath are further away from the games than people in London, and people in Perth and North Perthshire are further away still. However, people in Hillingdon or Uxbridge, or on the edge of north-west London and in Watford, or on the southern edge of Croydon, which is almost into Surrey, will receive no direct benefit from the regeneration of the east end, any more than people in Loughborough or Wales or Scotland. They may be part of Greater London, but in many ways they consider themselves to live in Surrey, Hertfordshire or Middlesex, so they too want to know that they will not be asked to pay an undue amount. It is different for people who live in Hackney or Tower Hamlets, because they know that they will benefit directly from projects connected with the Olympics, such as the extension of the East London line, the development of the Lea valley and the legacy of housing and sports facilities. That is not the case for people a long way away on the other side of the largest metropolis in Europe.

Secondly and self-evidently, another of the contributions comes from Londoners—the LDA contribution. The LDA is one of the four children of the Greater London Authority, just like the Metropolitan Police Authority. So although the LDA is regarded as a separate heading in the funding streams, the money will not fall out of a tree and it certainly will not come out of the Mayor's pocket. It will come from Londoners. It gets money from other places, but it is basically a London kitty to which Londoners make a contribution.

Photo of Richard Caborn Richard Caborn Minister of State (Sport), Department for Culture, Media & Sport

The budget of the LDA, like any other development agency, comes from the Exchequer.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Party Chair, Liberal Democrats

But the reality is that when the Mayor stands for election and determines how much he will charge as a precept across the authority, some of the money that is collected can be spent on the sort of things that are done by the LDA. I accept that some of the LDA's money comes from the Exchequer, but—I stand to be corrected on this point—not all of it comes from the Government. The authority raises some of the money itself; some of it comes from joint schemes with the London boroughs and some of it indirectly from people who visit London. Certainly, businesses and individuals perceive that they contribute to all the budgets for all the spending streams from the Mayor's office, of which the Mayor administers one, and that is where pressure can be applied.

Pete Wishart pointed out that the proposal would mean capping the burden on Londoners at the expense of the Scots. That is a dangerous road to take. I do not want to be divisive, but I must put the case on the record: London contributes about 15 per cent. net to the UK economy, which is far more than it receives. Under the Barnett formula, Scotland has done very well, far better per capita than the rest of the United Kingdom. That is part of the constitutional development of the UK. London continues to raise, and spend, money and puts it into the UK kitty. As a capital city, it is happy to do so, but the hon. Gentleman would be wrong to think that we do not constantly make a significant contribution to Scotland.

Photo of Pete Wishart Pete Wishart Opposition Whip (Commons), Shadow Spokesperson (Cabinet Office), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (International Development) 5:30 pm, 6th December 2005

I accept some of what the hon. Gentleman says. However, we have only to consider what happened yesterday, when the Chancellor had to impose a windfall tax on Scotland's North sea oil to pay for all the shortcomings in the economy, to see how much Scotland contributes to the general economy of the UK.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Party Chair, Liberal Democrats

I do not say for a second that Scotland does not make a huge contribution to the UK economy, and I know well the history of the debate about the oil around the shores of the UK, including Scotland. Of course we remember yesterday's announcement, but the capital city of the United Kingdom has contributed for as long as the hon. Gentleman and I can remember to the United Kingdom's coffers, and that money has been spent throughout the UK.

Furthermore, of the 10 most deprived local authorities in the UK, five are in London, including the east end. If we want to ensure that there is fairness, it is wrong and improper to say that London is a great and affluent place that will benefit hugely. Some areas need to benefit as they have been deprived; inner-city areas, especially in capital cities, are often deprived.

There will be benefits for London and, as people travel in and out of London, those benefits will be shared before, during and after the games with people throughout the UK. I am talking not just about hope, expectation, aspiration, ambition and motivation, but also about opportunities for training and for individuals and teams to visit between 2008 and 2012, and the legacy.

There will be other, indirect, effects. A local London paper reported recently that, as a result of the Olympics, the costs of housing in London, both rented and purchased, are likely to be considerably higher than in other parts of the country, much more so in the east end. Many costs will be borne and the new clause proposes a cap on the element of the cost that is part of the deal whereby, as part of the formula, every London household puts more into the kitty.

Photo of Don Foster Don Foster Shadow Secretary of State for Culture, Media and Sport

Will my hon. Friend confirm that his understanding of the proposal is the same as mine? We are talking about a cap on the contribution paid by the council tax payers of London, but were there to be an overrun, which we do not believe is likely, it would be funded by all taxpayers throughout the country, including London taxpayers, who, as my hon. Friend has rightly pointed out, make a rather greater contribution in that regard than taxpayers in other parts of the country. We would not be capping the total contribution of Londoners.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Party Chair, Liberal Democrats

My hon. Friend is right. Nobody is saying that Londoners would not have to bear their share of the burden if, despite the undertakings and expectations, there was an additional cost. We would pay our fair share like everybody else, but we are already making a specific extra commitment. We know that we have to do that; it could be for 10 or 12 years, which is not insignificant, especially for people on the lowest incomes, so we think that contribution should be capped.

As you would imagine, Mr. Deputy Speaker, this proposal has been debated across the political parties in London. As the Minister knows, when it went to the London Assembly, 14 members of the Assembly across all parties, including the Minister's, supported it; no one opposed it.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Party Chair, Liberal Democrats

The hon. Gentleman says, "Funny, that". People are elected, as he was elected for the Rhondda, to represent the people in their communities. What I am trying to say is that this issue is not divisive politically; there is a unity of view. Just as there is a broad unity of view in London that we should have the games, that we shall make a great success of the games and that we want the games to do well, there is equally a view that there should be a financial responsibility on all of us—a discipline that limits the amount that we expect Londoners to pay. If that can be agreed, it will be an additional reason why Londoners will support the games and the planning for the games in the years ahead with even greater enthusiasm. I hope that, if the Minister does not accept the proposal today, he will at least accept its merit and agree that it may have to be part of the eventual outcome of the deliberations on the Bill.

Photo of Richard Caborn Richard Caborn Minister of State (Sport), Department for Culture, Media & Sport

Before I address the details of the new clause, I want to make a couple of comments about how we approached the decision to bid for the Olympics. We took the decision only after a lot of discussion with cities that had run the Olympics. We asked what they would do differently if they got to run the games again, and many of them told us, "You must make sure that the budgets that are put in place are robust, and will stand examination over time". We therefore adopted that approach, and were commended for it by the evaluation team—the IOC. So we believe that the formula, which I shall outline later—the memorandum of understanding between the Government and the Mayor—is the right way to proceed in order to ensure best management practice in running the games, particularly from a financial perspective.

It would be unfortunate if the House of Lords decided to delay the Bill on the basis of this issue. I say that for the simple reason that we received another crucial message from cities that had hosted the games: that the quicker we set up the company—the ODA—and lay the contracts, the farther we shall be from the end date and the more we shall be in the driving seat and able to control costs. That is why, as I acknowledged earlier, we are grateful for the support that we have had from all political parties and for the way in which the House has dealt with the Bill. We won the games on 6 July and we could well get legislation on the statute book by the early part of next year.

Terminal 5 has been mentioned as a major construction project—in fact, the major construction project in Europe at this stage. It will cost just under £5 billion, it will come in on time and it may well come in well under budget. We are working closely with the team guiding that project. It should be recognised that more apprentices have been trained at terminal 5 than in the whole of the construction industry put together, so the hon. Member who was quipping from a sedentary position about Romanian, Polish and other labour should re-examine that comment and go and look at terminal 5, which is a credit to the construction industry and to the British Airports Authority. About 8,000 people are working on the terminal, but as my hon. Friend Chris Bryant said, tens of thousands of people around the country are part of the supply chain, providing high-quality engineering—a supply chain that is probably the envy of the world. If we apply that type of management to the scheme that we are now embarking upon for the Olympics, I am pretty sure that all that we said we would do in our candidate file is deliverable, so we stand by the statements.

We have debated proposals of this type before. It would place a cap on the amount of council tax income that might ever be spent on preparing for the games. We cannot agree to such a cap, and I hope that when I have restated the reasons, Hugh Robertson will feel able to withdraw his amendment.

It is true that, as Mr. Foster said, the Government and the Mayor have agreed that the GLA will make available £550 million towards the public sector funding package, with a further £75 million if required. That is how the hon. Gentleman gets his total of £625 million. The Mayor's contribution will be raised through the GLA precept on council tax, starting in the 2006–07 financial year.

We have no intention of letting costs run out of control, and the Government and the GLA will make every effort in managing the Olympic project to keep to the original budget. However, if costs exceed the provision allowed for in the public sector funding package, the memorandum of understanding between the Mayor and the Government states that the costs should be met through a

"sharing arrangement to be agreed as appropriate with the Mayor of London and through seeking National Lottery funding in amounts to be agreed at the time."

I want to clear up a misunderstanding about land acquisitions by the London Development Agency. Small amounts of money may well have come from elsewhere, but the vast majority of the LDA's work has been directly funded by council tax. The LDA has been responsible for purchasing the land. Indeed, any overrun on price as the cost of land increases will not directly affect the council tax funding.

Let us consider the assets on the balance sheet post-2012. It is true that the LDA purchased considerable amounts of land well before 6 July and the price started to escalate, but those assets will stay on the LDA's books. I do not know what will happen if there is an overrun on the funding arrangements, but the assets acquired by the LDA—they are London's assets, not central Government's—could well be deployed. So the memorandum of understanding is an agreement that we would share that responsibility, depending on the prevailing conditions at the time.

Photo of Mark Field Mark Field Shadow Financial Secretary

Perhaps the right hon. Gentleman can clarify the situation in the interests of all London council tax payers today and in the future. Is he saying that the LDA will be obliged to liquidate some of its assets and therefore release some of the perhaps substantial property gains made to fund any possible overrun?

Photo of Richard Caborn Richard Caborn Minister of State (Sport), Department for Culture, Media & Sport

I am not saying that at all. What I am saying is that such things will be reviewed at the time. That is why we are not prepared to accept the new clause. It would be wrong at this stage to include that type of cap on the various funding streams. That could be deployed at a later stage.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Party Chair, Liberal Democrats

I agree with the Minister when he suggests that, if the land held by the LDA were to increase in value significantly, logically, that increase should be used to reduce the general council tax burden. That is my understanding of one of the reasons why that was put into the original memorandum.

Photo of Richard Caborn Richard Caborn Minister of State (Sport), Department for Culture, Media & Sport

Absolutely. That is why we say that all those factors will be taken into account. The memorandum of understanding mentions:

"amounts to be agreed at the time."

That is what the MOU is all about, and the way that it has been interpreted by some hon. Members is fundamentally wrong. We believe that this is the right approach. It would not be prudent at this stage to close off any of those funding options to meet a hypothetical future shortfall by capping the amount of council tax that the Mayor may raise. The GLA takes exactly the same view.

In the event of cost overrun, the Government and the Mayor will need to consider all the options available to them. It is right that council tax will fund some of the games, as they will bring a great many benefits to Londoners—again, that has been explained already this evening—but we have no intention of making a dramatic raid on ordinary council tax payers. If cost overruns were to occur, we would want to balance any possible costs sensitively to avoid imposing punitive costs on individual households. Nevertheless, the Olympic project will be overseen jointly by the Government and the GLA. Under the existing funding and governance arrangements, we have shared interests in running things properly and keeping down costs. That is the right way to do things.

We must ensure that we retain a shared interest in keeping down costs, but it would be entirely imprudent to cap the liability of one of those parties at this early stage in the process. It is therefore vital that everyone involved should have the maximum incentive to remain hawkish about keeping down the costs. My right hon. Friend the Secretary of State has already called in the aquatic centre proposals because of the possible cost overrun. I send a very clear message to all those who will be involved in contractual agreements that we will expect them to keep to those costs. That can be done—it can be done by the type of management that we have at terminal 5.

The Government feel that it would be irresponsible to place a statutory limit on council tax funding at the outset of the Olympic project. I reassure hon. Members again that in the unlikely and unfortunate scenario in which costs run over budget, we would sit down with the Mayor to work out a sensible solution that would not cripple the average household. The Mayor and the GLA are content with that reassurance, so I hope that hon. Members will also accept it and that the hon. Member for Faversham and Mid-Kent will withdraw the motion.

Photo of Hugh Robertson Hugh Robertson Shadow Minister (Culture, Media and Sport) 5:45 pm, 6th December 2005

Time is marching on and we have a great deal more to debate tonight. I am afraid that we have reached a position in which there is a straightforward divide between the Government and the main Opposition parties, so I will press the new clause to a Division.

Question put, That the clause be read a Second time:—

The House divided: Ayes 201, Noes 275.

Division number 115 Orders of the Day — London Olympics Bill — New Clause 1 — Limit on Power of Greater London Authority to Raise Money from Council Tax for Expenditure on London Olympics

Aye: 201 MPs

No: 275 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.