London Olympics

– in Westminster Hall at 11:00 am on 16th May 2006.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury) 11:00 am, 16th May 2006

It is a pleasure to introduce this debate. I suspect that we will have quite a few debates on the financing of the Olympics in the next six years. It is appropriate to visit the subject now, because we are getting past the stage of general concept and into the practical, gritty reality. The Olympic Delivery Authority has been established and the chief executive of the London Organising Committee for the Olympic Games is now in place. There is also the public inquiry into the site, and people are beginning to talk seriously about funding.

In the past few weeks, David Higgins, in almost the first words that he has uttered in his capacity of chief executive of the ODA, has suggested that the infrastructure costs would be not £1 billion, as originally thought, but £3 billion. It was not clear exactly what those costs referred to, but the implication was that the man running the show has a much more realistic—and pessimistic—picture of costings than has hitherto been portrayed.

Also, the Mayor has indicated in the past few days that he might have to acquire land, at considerable cost—pessimists have argued that an equivalent of possibly double the London council tax contribution will be needed, which is not something that was considered previously. I do not know what the truth is on those items—we shall come to questions about that later—but costings are now crucial and the issue of a properly financially disciplined games needs to be firmly set out.

I share the all-party consensus that hosting the games is potentially good for Britain and good for London. We should support the games and ensure that they are a success. Success is not just about sport but about funding and the wider economics. My other motives for approaching the issue are several, the first of which is that I represent a constituency in south-west London.

I was surprised and a bit taken aback by the strength of feeling that I encountered on the doorstep in the past few weeks from people who had realised for the first time the extent of the council tax increases that they face—because of the nature of property valuations in London, many are nearer £40 than £20 a year. It is not so much the cost, which I guess most people can afford—at least at the upper end of the income scale—as the feeling that things are open-ended and there is much more to come.

In trying to justify the games and explain things to my constituents, I appreciate that their response is not just a grumpy reaction to paying for the games. Twickenham is already a sporting Mecca and we are proud of that. There are the usual frictions associated with stadium communities, but we are proud of our association with rugby union. However, the key thing about the sport is that its big events—from the World cup down to internationals—are self-financing. It does not depend on largesse from London or the Government. Indeed, one of the gripes of rugby union is that corporation tax has to be paid on its profits, just as if it were a company, and the surpluses go to the Treasury, not back into grass-roots sport as they should—a point that I have made to the Minister and the Chancellor.

We now have another big spectator sport in Twickenham. As a fellow Yorkshireman who grew up with rugby league, I know that the Minister will be pleased that Twickenham now boasts a rugby league side that sits above the mighty Wigan in the premier league. Like rugby union, however, rugby league is a self-financing sport and does not depend on subsidy.

We have also had bad experiences locally of national funding of sport, which has jaundiced an awful lot of people's thinking. I suspect that the biggest participant sport locally is swimming. We have one public swimming pool, which is open and heated. For my first five years as an MP, I battled with Ministers and Sport England to get some support from the lottery for the pool. Initially that was ruled out on grounds of pure dogma—in no circumstances would the lottery support open pools—but, with the help of the then Sports Minister, we got the fatwa lifted. However, we were then told that although the pool was an admirable project, which would serve many thousands of people and was no longer barred on principle, Sport England did not have enough money, so we had to go for a cheaper patch-and-mend solution. Unfortunately, a few months after the announcement we were told that there were hundreds of billions of pounds available from the sports lottery for the Olympics. I think the Minister will understand that a lot of my constituents—the tens of thousands who use this community facility—are a little jaundiced when they hear about the way in which the Olympics are being funded.

My final local point is that, like all communities, we have local athletes of whom we are very proud. Unfortunately, in the case of Twickenham, the most celebrated name recently has been that of the gymnast Ben Brown, who publicly announced that he was no longer able to continue training for the Olympics because there was no support for him. I know that the Chancellor has subsequently come forward with a handsome sum of money, but I think it was too late in his case.

I paint this picture because I want to try to convey to the Minister the fact that in my area, as in many parts of London, let alone other parts of the country, there are mixed feelings about the way in which the Olympics are being funded. There is a general sense of pride and optimism, but also grumbling. I am anxious that the grumbling should not become anger, and to that end we must ensure that things are properly managed financially.

A second personal reason for wanting to introduce the debate is the work that I did before I became an MP. I was involved in the oil and gas industry, with projects that were often as big as the Olympic games. In the private sector, no less than in the public, there can be massive errors and cost overruns. I have recently been reading about the travails of my former company in its projects off Sakhalin island in Russia, where costs are several hundred per cent. more than budgeted. In the private sector, there are disciplines to deal with that, which we used to call scenario planning. Managers are forced to set out what could happen rather than what they would like to happen and think will happen. In the funding of the Olympic games, I do not sense a hard scenario planning discipline. Are people looking at worst case scenarios, budgeting for them and preparing for the worst possible outcome, not in order to knock the games or undermine them but to be hard-headed and ruthlessly realistic about the prospects? That is my background and why I have come to the debate.

We are all concerned with trying to make a success of the games. Success is about money as well as sport. As the Minister knows, recent Olympic games have a mixed history. Some have been unambiguously successful: Seoul, Los Angeles and probably Barcelona—although there has been an argument about the legacy of the buildings there—are normally included in that category. Some have been commercially successful, although perhaps not successful in sport: Atlanta is the obvious case. Some were disasters, some for purely political reasons: Moscow and Munich. We have had commercial disasters, of which Montreal is the obvious example. Sydney massively overran and, most recently, in Athens costs escalated from £2 billion to £8 billion in broad global terms, and there is continuing anxiety about how Greece will cover that. We clearly want London to be at the top end of the range, rather than the bottom.

In order to try to analyse the problems, I have been trying to get a handle on the costs of the games. One of the difficulties is that quite apart from the big document that the costs are contained in, they are being presented in many different ways. Revenue and capital are also mixed up, there are differences between cash flow and balance sheet accounting and all kinds of conventions are being used, so it is difficult to get a handle on the costs that we are talking about and how they are being set off against revenue streams. In simple terms, so we can talk from a common base, my understanding is that the cost of the Olympics can be roughly put into three main categories.

First are the operating costs of £1.5 billion, which are predominantly commercial and are covered by TV rights, tickets and sponsorship, although there is an explicit Treasury guarantee on that component. Secondly, there is £2.4 billion in funding from the lottery, London council tax payers and the London Development Agency for the village's essential infrastructure, the transport, the stadiums and the security costs. The third, slightly ambiguous bit includes elements that were to be funded anyway, such as the Lea valley development and the village, which was originally seen as a purely commercial project, but which might not be now, given the Mayor's comments. It also includes the £7 billion envisaged for transport, which may or may not be necessary, but which would be desirable. We therefore have a rough range from about £4.5 billion to £12 billion, depending on what we do or do not include.

The big challenge for the organisers—the Government are, of course, centrally involved—is how to ensure that the costs do not explode as they have in other public and private sector projects. I am sure that the Minister is fed up to his eyeballs with all the pessimistic stories about previous public sector projects, but what amuses me is that people always choose the Wembley stadium project as a bad example, when in fact it has been pretty successful compared with many other projects, because the cost overrun is only 20 per cent, the project is overdue by only a year and almost all the extra costs have been borne by the commercial partner, Multiplex. That is rather a good outcome compared with many other projects, such as the Jubilee line, let alone real horror stories such as the Scottish Assembly or the British Library, which is probably the ultimate disaster case, having cost 10 times the original estimate and been 10 years overdue. Clearly, we are not heading down that road, but a lot of discipline will have to be exercised if we are to get close even to the outcome of the Wembley project, although of course the Government and the organisers cannot allow such an outcome, because the Olympics must be delivered on time.

The central problem is that the organisers must ensure that the project is delivered not only on cost, but on time. Some pretty sophisticated thinking is going into understanding how we can improve on previous public sector experience with big projects by drawing on best practice, as happened in the case of theT5 terminal, which is the model that is now being used. The central problem, however, is that although the Government, the Mayor and the people who will be operationally responsible are thinking about best practice, the people in the construction industry are also learning from experience. People do not get to be the chief executives of big construction companies by being Mother Teresa—they are hard-headed people and they have learned the lessons. Companies do not want to be the next Multiplex, so they will put in very high bids for contracts that involve rewards for coming in under cost and penalties for going over cost—nobody will take the risk of overshooting. When the bids come in, I suspect that we will be shocked by how big they are, and Mr. Higgins has perhaps been preparing us for that.

I want to set out a long series of questions. I hope that the Minister can answer them and that they will trigger discussions among colleagues in the Room. I think that they will form the basis for a process of questioning and public accountability in the months and years ahead. First, can the Minister explain what Mr. Higgins meant? Which infrastructure costs was he talking about? Was he talking out of turn or was his estimate of the cost escalation sensible and prudent?

Secondly, and related to that, when will the KPMG study on the cost of the Olympics be published? What is the Government's estimate of construction cost inflation? We do not need to get such information from an expensive commercial consultant, because it is presumably available to the Bank of England and the Treasury. According to unofficial estimates, cost escalation is about 7 per cent. a year, rather than 3 per cent. a year, but is that correct?

Leading on from that, once the KPMG study has been finalised, who in the Government or the ODA will be responsible for monitoring and modelling the construction industry over the next five to six years? I ask that because an awful lot of work will be going on. I think that Mr. Field spoke about this in a recent debate. Although the transport projects, the London Gateway project and the bridge are complementary to the games, they are also competing with the games for construction raw materials and labour. Who will monitor supply and demand in the construction industry? Has anyone got a grip on that? Presumably it is not the Department for Culture, Media and Sport. Is it the Department of Trade and Industry or the former Office of the Deputy Prime Minister? Is anyone in Government or involved with the project considering the overall flow of supply and demand in the construction industry and how that will affect costs as the project rolls forward?

There is a question about new items of cost. There is the possibility, raised by the Mayor, of the compulsory acquisition of land—of London buying land that was hitherto assumed to be part of a voluntary, purely commercial exercise. Will that happen? I do not know what the risks are, the current state of play or the Government's assessment of it.

There is a series of questions about how the ODA and the various partners to the Olympics will deal with the pressures that I have described. One question is about how they will deal with issues of design. There is clearly a big difference of strategic focus betweenthe Mayor and Lord Coe. I am not a great fan of the Mayor of London, but I believe that he said the appropriate thing for an elected politician when he said that London

"was not in the position of spending additional monies on iconic buildings", but he was promptly contradicted by Lord Coe, who rather tartly observed:

"We wouldn't want a tin-shed Games on the edge of a city."

Reading those quotations, one sees that there are very different perspectives on how the games and the facilities should be designed and costed. It is appropriate to ask the Minister where the Government sit in that controversy. What end of the spectrum are they at? Do they broadly agree with the Mayor or with Lord Coe? Where will they throw their weight in the argument?

Another question about how the Government in particular could help with the management of potential costs relates to the subcontracting of much of the construction work. One of the more worrying documents that appeared in the past few weeks was the report by PricewaterhouseCoopers, which I am sure the Minister has seen. It says that whereas London's GDP will benefit by some £6 billion, non-London will lose £2.8 billion. In other words, the rest of Britain will be worse off than if another country had staged the event. I present that not as a negative debating point but to make the point that the provinces of Britain could benefit from large-scale outsourcing and prefabrication in respect of a great deal of the work. They will have lower construction inflation, too. Clearly, the process needs to be managed, and I ask the Minister who is managing it.

There is a series of questions about sponsorship. The £1.5 billion needs to be met through aggressive and successful sponsorship. We all wish the sponsors well. It is a worthy cause and I hope that they are able to raise the money, but it is a big ask, because we are talking about more being raised in sponsorship than the whole marketing budget for British sport in any one year. What happens if the sponsorship falls short and the £1.5 billion operating budget cannot be met? Who is first in line to take up any slack if the sponsorship does not come in as we hope it will?

My hon. Friend Mr. Foster has been pursuing a series of issues relating to the link between sponsorship and the integrity, the copyright, embedded in the Olympic symbols. Quite rightly, the Government have been tough in insisting that those symbols should be protected. There is real intellectual property there, and protection is essential to encourage sponsors to come forward. There is an issue of detail, because we are all beginning to hear from small businesses that are irritated or frustrated that they cannot muscle in on the Olympics. The question for the Government is about when they will produce the guidelines that explain exactly how the integrity and intellectual property elements of the Olympic symbols are to be protected. What guidelines will govern people who try to encroach on that terrain?

There are also questions about security; we know from the Athens experience that that can blowthe financing of the games wide open. Clearly, the Government have to give security priority. If the security budget goes way beyond what was in the bid document, where will the slack be? To what item of the budget will the Government look to offset any escalation in security costs, as could well arise for very good reasons?

There is also an issue about the legacy and its costing. Who will benefit from the legacy? In the past few months, a change in the concept of the Olympic village has emerged; the village could become a more valuable, high-density development than was originally envisaged. Presumably, that means that after the games it will be worth a good deal more. That is positive, but who will have first access to that money? Will it be London, the Government or the International Olympic Committee? Under what formula will any upside be apportioned between the various partners? Similarly, who will take the first hit if it all goes badly? I am not clear that there is a clear protocol that defines which of the various supporters and guarantors will be first in line to take both the benefits and the losses that might arise.

How far have we gone in clarifying what will happen to some of the legacy buildings? I am aware that the IOC has praised the London Olympic bid for the thinking that has gone into legacy work. That is a very positive sign. As one who represents the rugby Mecca, I was somewhat struck by the proposal, current until recently, that the main likely future for the big stadium was to downsize its capacity from 80,000 to 25,000, and that it would probably then be used for a London rugby club. Harlequins, my local rugby club in Twickenham, is good and well supported, but even with the recent expansion of capacity, it operates at about 10,000. It is not at all clear how any London rugby union or rugby league club operating in the east end close to West Ham will be able to pull in anything remotely like 25,000 spectators. The concept I have talked about may have disappeared, but it would be useful to have clarity on whether the issue has been resolved, and if so, in what form.

We acknowledge that it was necessary to enter various guarantees, involving notably the Treasury, but also London as a result of the memorandum of understanding with the DCMS. The lottery is also a potential support. However, from what I have read and discussed, what is missing from the picture is the exact relationship that would exist between those three potential guarantors and support bodies in the event of things going wrong. Who will take the first hit when, and under what conditions? We need more clarity on that.

Among my constituents there is a mixture of pride and hope on the one hand, and worry, anxiety and even a degree of cynicism about the funding of the games on the other. The feeling is that the present generation of politicians of all parties is only too happy to scoop up the credit for having brought the Olympics to London, but in six, seven or eight years' time somebody else will have to pay the bill. If we are to prevent that anxiety from degenerating into outright cynicism, it is important that we should be absolutely up front and clear about the costs, risks and potential dangers, and that we should face them now.

Photo of Christopher Fraser Christopher Fraser Conservative, South West Norfolk 11:24 am, 16th May 2006

Initially, I came only to listen to Dr. Cable. However, having understood and appreciated what he has said, I should like to make a few comments.

Financial commitment is an important aspect of the games, because we have, dare I say it, been here before. Contingency planning has come before the House for many years. I remember when we discussed and managed the preparation for and development of the millennium dome, when I sat on the Select Committee on Culture, Media and Sport. Over a period oftwo years or more, we had the then Minister,Mr. Mandelson, in front of the Committee—I hope that the Minister will spend some time looking back at some of the evidence given then—and our biggest issues and complaints were about contingency planning.

Of course, things happen, as part of a development process, that one does not anticipate at the beginning. The hon. Gentleman's earlier questions on this issue are particularly timely, because we now have an opportunity to overcome some of the problems from which we have suffered on issues such as the millennium dome.

The hon. Gentleman pointed out that sponsorships have to come in. One of the problems with the millennium dome was that sponsorships did not come in on time, and the Ministers and other people involved with the commissioning of the dome had to back-pedal on many occasions. We all know that the costs spiralled enormously. Having said that, the dome opened on time, but then there was a big question about its legacy. Unfortunately for the Government and all those who supported the dome, the press had a field day and the dome became a great white elephant. The issues of the dome and its legacy still have not been resolved, and I do not want to see what could be a fantastic event for this country, with a fantastic legacy, being handled in a way that does not close off all the financial issues that were not closed off for the millennium dome.

The Culture, Media and Sport Committee also studied the preparation and build-up of the Olympic games in Sydney. Our Chairman decided that it would be appropriate to go out to Homebush, and we spent some time there. I was extremely impressed by the work done by the Australians in preparation for and in the build-up to those games. I may have this wrong, but I remember being told that they had sold off the competitors' village in advance to raise funds. We all thought that was fantastic, but at the end of the games—like many others, as was well described by the hon. Gentleman—even though their contingency planning was, in my opinion, well scrutinised in advance, they came across some extremely large financial costs which had to be supported by the Australian nation.

We cannot take anything for granted. We want the games to be a success. I want that not only for my constituents but for the nation. Importantly, we must accept that although not everyone can participate and compete in the games, everyone can be a part of the process. I would like the Minister to accept this morning, in terms of the planning commitments and finances that go with them, that we should have a nationwide project through our schools, sports clubs, regions and local authorities to encourage people to participate in a successful launch and games. That could do many things: it could mean that everyone says, "I didn't compete, but I participated," it could help to raise funds, and it could make people buy into the concept, so that when the games happen, everyone owns part of them. The nation's ownership of the games is a fundamental part of everybody understanding the financial commitment that goes with them.

I have a specific point to put to the Minister about the games and their legacy, and about contingency planning in order to get the "best of British" flag flown from the beginning. Does he agree that an environmentally sustainable Olympic park that demonstrates the best in UK green landscaping and planting would be a valuable contribution to the games? I speak with a vested interest: I am vice-chairman of the all-party group on gardening and horticulture, and in my constituency there are many companies that can and will produce first-class plants, trees and all sorts of landscaping products for use at the games.

My point—and it has been amply demonstrated that this was not well handled at the Athens Olympics—is that such activity is always considered last and not first. If we want to give a commitment to make the park an environmentally sustainable place where the whole nation can participate and it becomes a British park—not a world park, because we are flying our flag and nobody else's—I have to ask this question of the Minister: as part of the financial commitment, will he join me in calling on the Olympic Delivery Authority, by ring-fencing funding early in the development process, to allow this to happen, because I assure hon. Members that it would pay dividends in the end?

May I draw to the Minister's attention my early-day motion asking for this commitment? It currently has all-party support, but not enough people recognise the need for us to fly the flag for Britain. We need to make a financial commitment now, and we must ensure that that financial commitment, and the contingencies that go with it, are fulfilled before, during and after the games.

Photo of Don Foster Don Foster Shadow Secretary of State for Culture, Media and Sport 11:31 am, 16th May 2006

I congratulate my hon. Friend Dr. Cable on securing the debate. It is traditional to say that, but I also congratulate him on the content of his contribution. He made it very clear that the Liberal Democrats are fully supportive of all the work being done to ensure that London in 2012 has the best ever Olympics and Paralympics. However, he also made it crystal clear that our support comes with a clear understanding that we will be critical friends of the project, and that we will not be prohibited in any way from seeking answers to some of the crucial questions—questions that were raised not only by my hon. Friend's constituents in Twickenham but by people across the country. I am delighted that he had an opportunity to put a series of questions to the Minister, and I am sure that we all look forward to the responses.

There have been many debates in this Chamber and elsewhere about the Olympics and Paralympics. During them, it has been traditional for the relative merits of the cities of Loughborough, Bath and Sheffield to be aired, and for the virtues that they have to offer in respect of the Olympic movement to be extolled. I am prepared today to agree to a self-denying ordinance to make mention no more of my wonderful city and the contribution it can make, if we get a similar assurance from the Minister in relation to Sheffield.

The crucial thing so far has been the cross-party support for the Olympics. In a recent letter from the IOC to the Secretary of State, the IOC praised that cross-party support and made it clear how important it had been in securing the Olympics and Paralympics for London in 2012. I must place on the record therefore my considerable disquiet at the winning of the Olympic games having been used in a Labour party election broadcast in the run-up to the recent local elections. I know that that concern is shared by Hugh Robertson. We have raised it with the Secretary of State, and we have been given a clear assurance that such events will not be repeated, which I welcome. We have also been assured that there will continue to be the opportunity for members of Opposition parties to work closely with the Government on the various issues that will no doubt come before us over the next few years, because this is a crucial project. It has not been said so far in this debate, but it has been said elsewhere, that seeking just to build the Olympic park and to make the associated transport arrangements is the equivalent of seeking to secure within just six years two terminal 5s. This is a huge project. My hon. Friend the Member for Twickenham is absolutely right to say that it is critical that we examine and question issues relating to the cost of this mammoth undertaking at all stages and to what happens if things go wrong, as they are likely to in one way or another. He rightly asks questions about who will pick up the tab and who will get the huge benefits that may come.

It is crucial that we do not see the winning of the games a year ago as the end of the matter. One of the diligent researchers in my office came across a quotation from Polybius, made over two and half millennia ago:

"Those who know how to win are much more numerous than those who know how to make proper use of their victories."

In a sense, that is what our debate is about: ensuring that we make proper use of our success in Singapore a year ago. Scrutiny mechanisms must be in place to ensure that we do not have the sort of fiasco we had with the millennium dome or the many other public sector projects to which my hon. Friend referred.

We must ensure, as Mr. Fraser rightly said, a sustainable legacy. That includes an environmentally sustainable park and many other aspects. We will be critical friends of the project, but from the outset enormous praise must be given because of the huge progress already made. That progress was recognised by members of the visiting IOC delegation recently. They rightly said that we were years ahead of some other cities that had previously won the great honour of hosting the Olympic games in their countries.

The London Olympic Games and Paralympic Games Act 2006 was passed in record time, and it will set up the various bodies that run the games. The Olympic Delivery Authority and London Organising Committee of the Olympic Games are both now well under way, and soon we shall see the official launch of the ODA, even though it already has some excellent people on board—people in whom I have a great deal of confidence. The organising committee has begun to search for the first tier of sponsors, which is an example of good, early progress.

London 2012 now controls 90 per cent. of the land at Stratford and has done deals with the majority of landowners. As my hon. Friend the Member for Twickenham says, we still have the compulsory purchase order inquiry to come, but good progress has been made. Work has already begun on the Olympic site with the burying of what were previously overhead power cables. Recently, Stratford International station has been completed, which will open next year once the final stage of the channel tunnel rail link is completed.

During the past 48 hours, we have seen the success of the national lottery, not just in meeting the £14 million target for this year's Olympic lottery games but in exceeding it by more than £2 million. We know that work is under way to consider all aspects of cost. My hon. Friend rightly referred to the KPMG study, and we look forward to that report. I hope that it will touch on the issue that he raised of inflation costs. A figure of roughly 3 per cent. has been assumed, but many people are saying that inflation costs in the construction industry are running somewhere in the order of 7 per cent.

Understandably, there will be concerns. My hon. Friend said that we should be "ruthlessly realistic" about the cost of the games, and that notion should apply at all stages. The fullest information must be made available, so that as many people as possible can be engaged in the necessary scrutiny. We do not wish to be left in the same situation as Athens—some are saying that it will still have to find about €9 billion or €10 billion.

We know that there are huge challenges ahead, and my hon. Friend mentioned many of them. I do not wish to repeat things, but I shall discuss additional concerns. A huge challenge is being given to the national lottery in respect of the money that it is to secure both from its traditional funding sources, where money will be taken away, and from the money raised through the specific Olympic promotions. Despite the recent successes—overall lottery ticket sales have increased for three years on the trot, which is welcome because of the money that is going to good causes—there are some clouds on the horizon.

One such cloud relates to lottery-style games, which are increasingly being run by gambling operators and have no mandate to raise money for good causes, yet offer lottery-style arrangements. They confuse consumers, are at odds with the duty of the Gambling Commission to ensure that gambling is conducted in a fair and open manner, and are increasingly diverting money away from the national lottery and the good causes that it supports, including the Olympics.

I also have a concern about possible impacts on the national lottery of the newly-established online lottery, monday. Recently, on the Floor of the House, I asked the Minister whether it had been set up as a result of a loophole being found in the existing legislation. I was told that that was certainly not the case and that it was all perfectly above board. It seems odd that monday is claiming that it is offering a prize of £1 million, yet the operators are set up as a so-called society lottery, for which the legislation requires that the maximum prize be £200,000. The only way in which it can offer£1 million is by linking five individual lotteries, but I understand that such linking is also not permitted.

We have concerns about how that particular online lottery is operating. It is setting itself up very deliberately—its advertisements are clear—in competition with the national lottery. I recall the Minister assuring me during debate on the Gambling Bill that everything possible would be done to protect the national lottery. I am in favour of society lotteries. I moved amendments to propose that such lotteries that provide funding for hospices, for example, would be protected. The monday operators have found a loophole in the legislation, which I hope will be examined quickly.

My hon. Friend and I share the growing concerns of some Londoners about the contribution that they will have to make. My party has argued, and the Conservative party has supported us, that there should be a cap on the total contribution that London council tax payers should make to the running of the games. Londoners will benefit more than those in other parts of the country, but there is a limit to what they should realistically be expected to pay. They should not be put into a situation where they have no certainty about how long they will have to make the contribution for. I must point out something that is rarely said in a debate about London council tax contributions. The total contribution is estimated at £625 million, but the Mayor of London has always made it clear that that represents £550 million going towards the Olympics and Paralympics, and the further £75 million has been included for potential cost overruns.

I am also concerned that Londoners may not get the full benefit that they seek. One concern is whether we are doing sufficient to ensure that people in London have the necessary skills to acquire the jobs that will be created. A recent Local Government Association report expressed concern that not enough was being done about that.

Another area of concern relates to tourism, for which the Minister also has responsibility.

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

I apologise to the Minister. He has been stripped of that responsibility, but he had it until recently, and I know that he is an expert in these matters, so he will have no difficulty in responding to my point. I say to him in the gentlest possible way that I for one am confused by the Government's policy on tourism. Before we had won the games, the Secretary of State proudly boasted that she would get behind tourism and that, consequently, by 2010 we would achieve income of £100 billion from tourism. That was her tourism target. The Minister looks puzzled. It was published on 19 July 2004.

We won the Olympic games, there was a pause and then the Prime Minister decided to get in on the act. He produced the Prime Minister's Olympic tourism charter. When we asked for a copy of it, nobody could give us one. Eventually we got one—it was printed on one side of an A4 paper—but nobody has heard any further details. The interesting thing was that it set a target of £100 billion for income from tourism by 2012. Having won the Olympics, the Government appear to have downgraded their aspirations for income from tourism.

Finally, on the nations and regions, I have spoken to the Minister about the commitments that we all made to our electorates that all parts of the country would benefit from the Olympics and Paralympics coming to London. It is critical to ensure that that is the case and that at the earliest possible opportunity people in every part of the country who were so supportive of the bid for the games are given information on how they will benefit not just from one-off contracts, although those are important, but from lasting legacies in each nation and region.

I note with some concern that the chief executive of the British Olympic Association is urging the Minister, as did my hon. Friend in his excellent contribution, to publish at an early stage a set of guidelines on how plans for—rightly—protecting the Olympic symbols and names will be put in place in a way that enables firms, businesses, organisations, charities and so on in each of the nations and regions to feel that they are able to contribute.

My hon. Friend asked a series of excellent and important questions. We look forward to the Minister's answers, but I end where I began, by saying that, notwithstanding the fact that we are critical friends of the Olympics and Paralympics, we believe that significant progress has been made. The games are a huge opportunity for each part of this country as well as for London, but a great deal of work must be done to ensure that we grasp that opportunity in such a way that our preparations are not only on time but on budget.

Photo of Hugh Robertson Hugh Robertson Shadow Minister (Culture, Media and Sport) 11:48 am, 16th May 2006

I, too, congratulate Dr. Cable on securing this debate on the financing of the Olympics. It is of course only six weeks since the London Olympic Games and Paralympic GamesAct 2006 passed through the House, but three key things have changed since then. The first is that the Olympic Delivery Authority has been formed as a result of the Act. It is focusing its attention on land acquisition, site assembly and, particularly, the businesses. Secondly, the Olympic precept has hit the doorsteps—people are now paying for the games.

Thirdly, the local elections have taken place. We had the same feedback in west London that the hon. Gentleman described. There is a clear feeling that people in the west of the capital are not benefiting from the process at all, and that came back time and again during the local election campaign. We have already spoken to the Minister and voiced our dissatisfaction about the party political broadcast. I suspect that in some subconscious way people's feelings were stirred up. There are many people in the west of London who believe that the games are very east London-centric and that they are not benefiting them. The first of five questions that I want to ask the Minister is about the plans of the Government and the Mayor to ensure that west London benefits from the Olympics in the same way that east London evidently will. I want to concentrate firmly on the financing of the Olympics.

As the hon. Member for Twickenham said, the issue is a jungle, but it is best explained by breaking the Olympics down into four departments. The first is the area for which central Government are responsible. They have responsibility for the overall strategic direction, the legislation and the funding through the Exchequer and lottery. As the hon. Gentleman said, tied up in that are generic infrastructure improvements—exact cost unknown. The second department—these divisions correspond exactly to the four seats on the Olympic board—is the responsibility of the Mayor and the ODA. They are responsible for infrastructure; the estimate for that is £2.375 billion.

The third department is that managed by LOCOG, which is effectively the event manager. It raises its income through sponsorship and merchandising. When we considered the Bill, we were told that LOCOG had to raise £1.5 billion, as the hon. Gentleman said. In a written answer to me this week, the Minister for Sport suggested that that sum was too big. Finally, there is the BOA, which is responsible for training the athletes.

The best analogy for that structure that I have heard is that of a theatre: the Government decide that having a theatre would be a good thing; the ODA and the Mayor build the theatre; LOCOG is the events manager who lays on the show; and the BOA ensures that the actors turn up ready to go, having learned their lines. That is the rough division.

Let us consider those four areas one by one, starting with the Government. We debated the Government's part extensively during proceedings on the London Olympic Games and Paralympic Games Act, and there are two points worth emphasising. First, there is still a crucial lack of protection for Londoners from any cost overruns that may occur. We suggested to the Minister—we proposed an amendment, supported by the Liberal Democrats, to this effect—that there be a cap on Londoners' contributions. In the absence of that cap, the feelings that the hon. Member for Twickenham mentioned will continue. There is a real worry—particularly in west London, where the hon. Gentleman's constituency is—that costs will overrun and that Londoners will be left to pick up the tab. Until the Government address that, those concerns will continue.

The second point to emphasise is that the Minister could have been spared the battle with the Treasury over funding that characterised the autumn and the spring and that caused so much unpleasantness if the Government had adopted either or both of the policies that we advocated at the time. They were: to return the tax on the Olympic lottery game as a one-off—that would have provided £320 million, which would have comfortably paid for all the elite athlete provision—and to put back the four original pillars of the lottery. The other day, I was interested to note figures from the Library showing that since the lottery was reformed in 1998, £3.2 billion has gone away from those four original pillars, although some of it has come back. That is quite a headline figure. If sport had received a quarter of that—£800 million—it would be in a dramatically different place.

The second of the four areas is the part played by the Mayor and the ODA. That is at the heart of this debate. London council tax payers are expected to contribute £625 million. A KPMG review is in progress, and that will look into where costs have increased and where value can be added to the site, and so where the bill can be adjusted. However, there are five key things that give us worries about cost overruns. The first is the evidence. I am afraid that the evidence is simply that every single Olympic games up to now have substantially overrun their budget. Local taxpayers in Montreal are just now paying off the debts incurred in 1976. Sydney's budget was £1 billion, but the games eventually came in at £2.8 billion; Mr. Fraser alluded to that. The Athens budget of £1 billion went up to £5 billion. So the evidence is not at all encouraging; indeed, the one thing of which we can be sure—apart from death and taxation, of course—is that there will be an overrun on the Olympics.

The second worry is that security costs are likely to soar. The budget was decided on before 7 July last year. No Member of this House can believe that the international security situation will improve dramatically in the near future. I think that we would agree that, if anything, it is likely to get worse. It was the rising cost of security that caused Athens to run over budget so dramatically. I believe that the security budget is £220 million. The question is whether the Minister still holds to that figure.

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

I urge caution on the hon. Gentleman. Was not a new Tetra security system established as a result of the increased cost of security in Athens, which has provided a lasting legacy? That could have been borne outside the Olympic costs. We have to be careful about where the different costs lie.

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

I entirely take the point. However, the central point is that the original budget of£220 million is unlikely to sustain the post 7 July environment.

Thirdly, I have always felt that there is a contradiction at the heart of the process. The Mayor has always been commendably honest about his reasons for supporting the Olympics: he wants to regenerate the east end of London; it is his lifetime's passion. However, that is not the Government's key priority; they want to deliver the 2012 Olympics on time and on budget, as the best games ever. The temptation for the Mayor to try to get a little more for his key lifetime's project of regenerating the east end will be irresistible. That will necessarily add to the pressures on the budget.

Fourthly, the cost of acquiring land in the lower Lea valley—and therefore of site assembly—is bound to have risen dramatically since we secured the Olympics. That is an inevitable product of the market.

Finally, to pick up on the point made so clearly by the hon. Member for Twickenham, I looked up the inflation rate of building costs, and the current estimate is that it stands at 7 per cent. However, the bid document shows it to be 3 per cent. My second question for the Minister is therefore this: is the funding package of £2.375 billion still accurate, and in particular how have the estimates for security at£220 million and for construction sector inflation at3 per cent. altered since we debated the Bill?

The third area of concern is to do with LOCOG. It has rightly received wide praise for the progress it has made since the bid was won—particularly, as Mr. Foster said, during the IOC visit. When the Bill was going through Parliament, we were told that LOCOG would have an operating budget of £1.46 billion. That was made up of£550 million from the IOC; £310 million from ticket sales in its role as an event manager; £100 million from revenue, licensing, merchandising and the like; and £500 million from sponsorship. However, in answer a week ago to a written question that I tabled, the Minister told me that LOCOG's budget is now£2 billion. My third question to the Minister is why has the budget risen from £1.46 billion to £2 billion, and when was that increase announced? In connection with that, does the Minister still stand by LOCOG's original expectation that it would produce a profit in excess of £100 million? Clearly having to raise so much more must throw that profit forecast into doubt.

My fourth area of concern is the BOA—the fourth pillar of the Olympic board. It is in the market looking for sponsorship. We have raised the issue with the Minister before. Private sponsorship is now an extraordinarily congested field—a point made by the hon. Member for Twickenham. As far as I could see in my brief survey, LOCOG is in for either £1.5 billion or £2 billion; UK Sport is looking for £100 million, as announced by the Chancellor in the Budget; the Youth Sport Trust, albeit a charitable organisation that has already secured sponsorship for the UK school games, is also in the market looking for money; and the National Sports Foundation, which the Minister launched in April, is looking for private sponsors. That strikes me as an incredibly congested field. A number of sports bodies are likely to be competing with each other and possibly against each other, so my fourth question for the Minister is how does the DCMS, which is the only body that can regulate or act as umpire, plan to regulate the market, and what are its priorities?

London 2012 has two central sporting objectives. The first is to put more British athletes on the rostrum, and the second is to increase the number of people who take up sport. The first has been dealt with as a result of the Chancellor's announcement in the Budget, but the second very firmly has not. Many people are making encouraging noises about how we want to get more people, particularly young people, involved in and taking up sport for all its health and educational benefits. So far, however, no pot of money will pay for those improvements, and they will not happen by magic. The Greeks tell me that fewer of them participate in sports now, after the Olympics, than before. The Australians, whom I visited last month, told me that there was no discernable take-up in sport as a result of the 2000 Olympic games. The fifth question is how can the improvement in mass participation be financed? Connected to that, does the Minister believe that through Sport England, the structure is capable of delivering the improvement?

In conclusion, I congratulate the hon. Member for Twickenham on securing this timely and useful debate. I thank all those who have contributed, including my hon. Friend the Member for South-West Norfolk, and of course the hon. Member for Bath. I would like the Minister in his winding-up speech to address five key questions. First, what plans does DCMS have to ensure that the whole and not merely the east of London benefits from the games? Secondly, is the funding package of £2.375 billion still accurate, and what are the estimates for security and construction sector inflation? Thirdly, why has LOCOG's budget risen from £1.5 billion to £2 billion, when was it announced, and does it still hold to its target of producing more than £100 million in profit? Fourthly, how do the Government plan to ensure that the sponsorship market is properly regulated? Finally, how are the improvements in the mass participation agenda to be structured and delivered?

Photo of Richard Caborn Richard Caborn Minister of State (Sport), Department for Culture, Media & Sport 12:02 pm, 16th May 2006

I shall try to answer the many questions that have been asked, but first I congratulate Dr. Cable on securing the debate. It is always good to update the House, and this is an opportune time to do so. I shall try to answer the questions as I go through my response to the hon. Gentleman.

As has been reflected again this morning, 6 July 2005 was a momentous day. There was great rejoicing and a great feeling of pride when Jacques Rogge said London. Several of us present today were at the announcement, and we also saw the fantastic celebrations in London and the length and breadth of the United Kingdom. We must now manage those expectations into reality, and the hon. Gentleman brought us down to earth to start analysing how we are doing so. I hope that what I shall say will provide some assurances that we are well on the way with the management of the project. It will be managed probably as no other major project in which Government have been involved has been.

We are determined that the London Olympic and Paralympic games will be a memorable and inspirational event that leaves a lasting sporting, social and economic legacy, and that not only London but the nations and regions throughout the United Kingdom benefit and gain from it. It has rightly been said that the challenge facing us is formidable. As Mr. Foster said, the biggest construction project in Europe is terminal 5, which is running at £5 billion, but we are embarking on a project twice the size in half the time. By any standards, it is a challenge, but the prize is a legacy that will last for generations.

The regeneration of the Lea valley—one of the most deprived parts of the UK— will make it into a stage fit for the greatest sporting and cultural show on earth. Although we rightly focus on the Olympic games, we must put the event in context. It is the gateway to the Gateway: the gateway to the Thames Gateway, which is a 20-year project and, again, probably one of the largest investments in transport, social and housing infrastructure anywhere in Europe. What we are discussing will bring about between £13 billion to£15 billion of investment, with a lasting legacy of not just a stadium or other sports facilities but housing, as we have heard, improved transport infrastructure, schools and health care. That is an integrated regeneration package, of which the Olympics are part.

The games will also bequeath a powerful sporting legacy to the whole UK, as I have said. Those 60 days in 2012 will give many young people throughout the UK the unique opportunity to see elite sportsmen and women competing at close hand. I have talked to people who saw the 1948 Olympics, and the experience is vivid in the mind of many of them. I hope that tens of thousands of young people will for years to come be affected in that way.

We have heard many times about the inspiration of competing in one's own country. We are determined to capitalise on that, creating a new generation of elite sportsmen and women in the UK. London will inherit major new sports facilities, including an aquatics centre, a velo park, a hockey arena, an indoor sports arena and the main stadium, but the UK will also benefit from top-class sports facilities. That is how what we are doing differs from Australia's approach and that of many other countries that have won the right to stage the Olympics in the past. Through the nations and regions group we shall invest—and are already investing—in sport and recreation facilities. An impetus is added in the Olympic context.

The work will also bring considerable lasting benefit to business and the economy throughout the UK. The games are expected to create 7,000 jobs in the construction industry alone. In addition, a further 12,000 jobs could be created as a result of the legacy development of the Olympic park area. A cultural Olympiad is planned to coincide with the games and a wide range of cultural events will be staged throughout London and the UK. Jobs are likely to be created in the cultural sector as a result, and stage managers, lighting technicians, producers and artists will co-ordinate a massive programme of events.

The games will also offer a considerable boost to the tourism industry in the UK, by putting this country in the biggest shop window in the world. The games are seen by billions of people, and visitors will naturally want to see what else the UK has to offer. It is essential to consider tourism—a matter that the hon. Member for Twickenham raised. It has always been difficult to get visitors to one of the most famous capitals in the world, if not the most famous, to go to other parts of the United Kingdom. The games give us an opportunity to do that. Only yesterday I was discussing with representatives of visitBritain how we could capitalise on the Olympics and other sports events and use London as the gateway to the rest of the UK. We are now receiving a level of co-operation from Visit London that we have not had before.

I am fairly confident that we shall be able to do what was done in Sydney where there were an extra1.6 million visitors between 1997 and 2001, with a spending power of 6 billion Australian dollars between them. We should expect to do equally well or, I should hope, better, in 2012. Tourism industry leaders forecast that hosting the 2012 games should be worth at least £2 billion to our visitor economy. Those benefits will fall particularly on London. However, we are committed to ensuring that the 2012 Olympics will maximise the potential for job creation, training and business growth throughout the UK.

Early progress has been made, as both Government and Opposition Members have I think acknowledged, as, recognising the need for fast progress, we either passed or at least framed much of the relevant legislation ahead of 6 July, to get a flying start if London proved successful. By 31 March this year, more than £40 million had been spent on essential preparatory works. To date the Chancellor has announced an additional investment of £200 million in our most talented athletes between now and 2012. The London Olympic Games and Paralympic Games Act 2006 has received Royal Assent, and I want to acknowledge the support that we received from all parties in the House, and indeed in the other place.

The Olympic Delivery Authority has been established and its board appointed. Its board is one of the most significant to have been created while I have been the Minister, and I was very pleased at the number of people who came forward.

Let me digress slightly, however, on the issue of the Olympic board. The IOC delegation came here to look at the progress that is being made, and everybody will acknowledge that its report was very good, but I get very concerned when I see articles that are as ill-informed as the one in yesterday's Evening Standard. It was headed "Get a grip now on the Olympics,Ms Jowell" and was written by Rowan Moore, who I understand—I have never met the guy—is the paper's architectural critic. The IOC delegation made it clear that it gets all the cuttings from the British press, and its members are incredibly well informed—they know what goes on in Select Committee and in the press.

Let me quote just one bit of Rowan Moore's article to show how ill informed he is. He writes:

"For much of the time since the bid was won, it has been hard to know who is in charge. It took months to announce the chief executive of the Olympic Delivery Authority, when it could usefully have been done a day after the victory."

A 10-year-old student of politics would know a lot more about how this place works than Rowan Moore does, and the headline ought to be "Rowan Moore, get a grip on the facts", but the fact remains that the article will now appear in the IOC's files. Rowan Moore is doing a disservice to the Olympics and to this nation. As Opposition Members have said, no one could have been more open than the Department, and I invite Rowan Moore to check his facts.

What concerns me more, however, is that when the Secretary of State asked the editor of the Evening Standard whether we could have the right to reply to the article just to put the record straight—after all, we are talking about a national programme—she was denied that right. I say this more in sorrow than in anger, but that article, with its ill-informed commentary, will now be in the IOC's file, and we do not even have the right to reply to put the record straight. Broadly speaking, in the run-up to London winning the bid, editors and the press were very supportive—

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

In a minute.

The press were very supportive, and we welcomed that. All I am saying to them is, if they want the information, they can come and get it, but will they please not put such ill-informed articles in newspapers and then try to argue, on the back of that, that the thing is likely to go wrong? As the hon. Member for Bath said, there will be constructive criticism, and that is absolutely right—we can accept that.

Photo of Christopher Fraser Christopher Fraser Conservative, South West Norfolk

I am not excited. I am trying to get on with the debate.

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

We will scrutinise this issue—that is what these debates are about. If the press want the information, they should please come and ask for it, and we will give it to them. I hope that the Evening Standard will give us the right of reply and thatMr. Moore will make sure that he gets his facts right in future.

Photo of Christopher Fraser Christopher Fraser Conservative, South West Norfolk

May I draw the Minister back to the debate? As I sat on the Back Bench, I noted that he was asked more than 37 questions, but he has spent the past three and a half minutes on what I would suggest is a rant about an issue that he should take up outsidethe Room. He should perhaps spend the next 13 to15 minutes answering our questions, which are totally relevant and which would give him the opportunity to put on the record his support for our comments and to let us know that the financial probity of the games is secure, rather than spending time on a rant against a newspaper.

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

I totally reject that. I would not have had to come here to say what I did had the Evening Standard been reasonable about a national project and given us the right of reply. This is the only place where I can say that that was fundamentally wrong and that it will do a lot of damage to the British case—it is power without responsibility. If people write such things and know that they are fundamentally wrong, but then deny us the right of reply, the issue needs raising. However, I will leave it at that.

Photo of Christopher Fraser Christopher Fraser Conservative, South West Norfolk

Thirty-seven questions, 15 minutes.

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

If the hon. Gentleman wants another Adjournment debate, he can have one. I am more than willing to spend hours in front of hon. Members.

The EDAW consortium has been appointed to design the Olympic park and infrastructure. The relocation of high-voltage overhead power lines into tunnels underground is under way to deliver an essential improvement to the environment of the Olympic park. A charitable trust to support cultural and sporting initiatives associated with the games has been announced. That initiative is worth £35 million and will see the end of the Millennium Commission with the funding going to the trust. On 24 January, the Department for Culture, Media and Sport hosted a business summit, which was attended by more than300 business representatives and was massively oversubscribed. The summit set out the key challenges and opportunities facing business, including up-to-date information about procurement. That was followed up with a further business summit in the west midlandson 9 May, which was organised by the regional development agency, Advantage West Midlands, which is very proactive. On 30 January, the Olympic Delivery Authority announced updated plans for the Olympic park site. Camelot's income target for raising lottery income for 2005-06 was met, and indeed exceeded by some £2 million.

The first "Go for Gold" scratchcard was launched on 28 July and sold faster than any other £1 scratchcard launched by Camelot since November 2002. A second edition was issued in September 2005. On 1 February 2006, a new £1 winter sports scratchcard, "Win Gold", was also launched. During its recent visit, the International Olympic Committee expressed itself well pleased with the progress that is being made.

In 2003 the Government agreed a public sector funding package of £2.375 billion to deliver the Olympic venues and infrastructure and to secure the development of athletes. The package will be funded from the Olympic lottery, the sports lottery, other lotteries, the Greater London Authority and the London Development Agency. The bulk of the package—£1.5 billion—will be met from the lottery. The Olympic lottery has already raised some£16 million. It is expected to raise a total of £96 million in 2006-07 and to deliver a total of £750 million by 2012. The sports lottery will deliver £340 million for elite athletes and associated sports infrastructure. The £200 million of Exchequer money that the Chancellor announced in the Budget is on top of that.

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

That is at the heart of the debate. Is the Minister saying that the £2.375 billion is robust?

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

I will come to that.

Other lottery funding of up to £410 million will come on stream from January 2009-10. The London Development Agency will deliver up to £250 million from 2008-09. The GLA has agreed to contribute up to £625 million from the London council tax precept. The funding that comes on stream this year accounts for around a quarter of the public sector funding package. I recognise—this was clearly spelled out during the London local elections—that hon. Members are concerned about the impact of the precept on London council tax payers, particularly in west London. However, to put the financial impact in context, it is expected that average London home owners in band D properties will pay 38p a week, or a total of £20 a year. As hon. Members know, that formula has been used in many United Kingdom cities, including Manchester for the Commonwealth games and Sheffield for the World Student games. That is reasonable because those cities received considerable investment in their infrastructure. The formula has been tested, and given the massive benefits that the games will bring to the UK and particularly to London as a whole, we feel that it is justifiable to put that financial burden on London.

I recognise that hon. Members are concerned about the risk of increased gambling addiction—the hon. Member for Bath raised the matter—resulting from the Olympic lottery. The Gambling Commission will be looking at the monday lottery, and if there is a move away from what Parliament intended, we will revisit the matter. We believe that the risk of problem gambling will be very low. The national lottery is not generally associated with problem gambling. Indeed, around70 per cent. of the adult population play the National Lottery, but spend relatively small amounts of money. The average weekly spend on the lottery was just over £2.84 in 2004-05. In 2004, only 3 per cent. of calls to GamCare—the organisation that looks into problem gambling issues—concerned national lottery products. Olympic lottery games need to be approved by the National Lottery Commission, and the NLC's statutory duties include preventing excessive play. It would not license a game that it considered encouraged that.

Hugh Robertson raised the issue of how cost increases would be addressed. We went round the world and looked at cities that had staged the games: Munich, Barcelona, Sydney and Moscow. We also looked at what Athens and Beijing were doing. The cities that we looked at, Sydney especially, were generous in giving us advice. As I have said before, two or three major themes emerged from that. One is that the first two years are crucial if people are to keep costs on track. What is needed is a company with the powers of compulsory purchase, which we have, and planning, and a robust budget.

It is also important to ensure that there will be a sustainable legacy. If there was any failure in Sydney, it related to the legacy. Sydney is spending £10 million a year servicing not debt but a main stadium that does not have a tenant. Another problem is that there are now two arenas in Sydney, although it wishes that there was only one. The tennis went down to Melbourne, which now has a massively underused tennis park. The legacy is important in terms of both sports infrastructure and the cost of that. We have considered the issue carefully as we have gone through the process.

It also became apparent to us that there are three stages to an Olympics. One is winning the right to stage the games, and we put together a formidable team to do just that for 2012. The second stage is producing the infrastructure, which basically involves construction and which we are doing through the ODA. The third stage is to deliver the games, which is the role of LOCOG. That body is chaired by Seb, and Paul Deighton is the chief executive.

The overarching body is the Olympic board. There are three stakeholders: the Government, the Mayor and the British Olympic Association. The Olympic board provides a strategic overview. The Government have learned the lessons of Wembley and the dome. There will be no Government interference in the ODA other than to give clear instructions and to ensure that it carries out its duty within a budget that will be defined and negotiated with the ODA. The ODA board is skilled; indeed, it has expertise like no other board that we have put together. I am very confident that the chief executive, the chairman and indeed the entire board will carry out the project and will do so with transparency.

We are committed to tight control of the funds, but we have never shied away from the possibility that costs will increase. The Government have given assurances that they will act as ultimate financial guarantor should there be a shortfall between Olympic costs and revenues. The 2003 memorandum of understanding between the Government and the Mayor envisages how any cost increase would be managed. We have rehearsed this many times in Committee, but I repeat that the memorandum explains that, should the shortfall between Olympic costs and revenues exceed £2.075 billion, the Government would expect to discharge that responsibility in a sharing arrangement to be agreed as appropriate with the Mayor of London, and through seeking additional national lottery funding in amounts to be agreed at the time.

A number of hon. Members are suggesting that we place a cap on the amount of London council tax that can be drawn on to support the development of venues and infrastructure for the Olympic games. As we have rehearsed, we do not accept that proposal. Capping the share of one contributor would simply increase the amount required from others. That would not be consistent with the pressure that needs to be exerted to keep costs down. Nor does it seem reasonable that council tax payers in west London should not make a contribution to the cost of the games. London as a whole is a major beneficiary of the games, so it is only fair that council tax payers in London as a whole should bear an appropriate share of the costs.

Hon. Members will know that we are undertaking a review of costs, which includes building inflation. In the light of that review, we shall consider howany additional costs should be met within the terms of the arrangements agreed. The cost review work embraces many strands, including security, venuesand infrastructure, reducing risk, contingencies and taxation. Maximising private investment is also important in the review. Any revised estimates will be reported only when they have been agreed and when the cost review has been completed.

The staging of the games is the responsibility of LOCOG, whose budget is now £2 billion, which takes into account inflation from 2004 through. The move from £1.4 billion to £2 billion is due to the costs of inflation over the period of the games.

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

Wait a minute. Inflation over a six-year period cannot be 33 per cent. If the budget has gone up from £1.5 billion to £2 billion, that is a£500 million or 33 per cent. increase. Is the Minister really saying that he expects inflation to equal 33 per cent. over the relevant period? That would be far in excess of the Treasury's estimates.

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

The advice that I have been given is that the reason for the move from £1.5 billion to £2 billion is the calculation on inflation. If the calculation is less, the figure will be less than £2 billion, but that is the calculation that has been made, and that is why the figure has moved from £1.5 billion to £2 billion. Ifthe hon. Gentleman wants, we can go back to that issue. I shall write to him.

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

For clarity, will the Minister confirm that he is saying that the operating costs of LOCOG to run the games are, on a real-cost basis, exactly the same now as when we first discussed them, and that the only difference is in which year's base we are talking about?

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

Yes, the advice that I have been given is that the reason for the move from £1.5 billion to the figure that I have given was the calculation on inflation. If that is wrong, up or down, we shall adjust the figure.

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

One final problem: it seems extraordinary to me that that figure should not have been used in the first place, because presumably that calculation can be made. Will the Minister guarantee that the same problem will not occur with all the other budgets, and that they have been done at 2005 figures? Will the £2.375 billion, for example, need to be compounded by 33 per cent. as well?

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

As I said, there has been a review on costs. The hon. Gentleman asked me about LOCOG and I gave him the answer on LOCOG. We are reviewing those costs. In 2004, the figures in the17 chapters of the candidate file were costed at 2004 figures. That is now under review. As the hon. Gentleman knows, before we won the bid on 6 July, we had to keep very firmly to those 17 chapters because we were making a bid. From November 2004 to 6 July 2005, we kept to that very religiously, as any change in cost would have been detrimental to our bid.

Since 6 July 2005, we have gone through the cost review to which I referred. The KPMG study will be built into the ODA's. It is looking at areas such as construction inflation as well—the hon. Gentleman said that that was 7 per cent., although I do not know whether that is true. These are exercises that we would expect to go through after making the bid. I have said clearly that once the cost review has been completed, we shall come back and report.

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

I am confused. Thirty-three per cent. is a hell of a hit and considerably in advance of the Treasury's estimates. Inflation is running at about2 per cent.; if one compounds that over six years, there is no way that it comes to 33 per cent. Clearly, we are not going to make much further progress on the issue this afternoon. Will the Minister agree to write to all Members who have attended this debate to explain the situation? There is a disparity between 2 per cent. compounded over six years and 33 per cent.—one does not need to be a banker to work that out. We need to nail the issue down.

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

I was asked why the figure had moved from £1.5 billion to £2 billion. My answer was based on my officials' advice, which was that the later figure included the inflation from 2004. If the figure is greater or less than £2 billion, I shall write to the hon. Gentleman to inform him. However, that is the reason for the increase.

A substantial proportion of LOCOG's expenditure will be met by sponsorship and the legislation has been drafted specifically to protect LOCOG's right to raise sponsorship. LOCOG has the rights to deal with the sponsorship and any illegal actions, as was clearly explained when the Bill was going through Parliament.

Finally, we have a lot more to do to convince people that the games are going to be beneficial throughout the UK, and not just in London.