Lot more gold needed for London Olympics

LONDON - The cost of staging the London Olympic Games in 2012 is set to double.

Senior officials organising the Games say construction costs have been seriously underestimated by the British Government.

A rise in costs could spell financial disaster for Londoners.

The Government has in recent days appointed consultancy KPMG to begin a reappraisal of its Olympic costs.

These have surged because original projections allowed for inflation at 3 per cent, while inflation in the construction sector is now over 7 per cent due to soaring costs of raw materials.

Wages in the construction sector are expected to rise substantially as London readies itself for a building boom. Improvements are being made to the underground system, and new Docklands Light Railway and East London lines are planned, as is a new Thames Gateway Bridge.

A senior figure involved in preparing for the London Olympics said: "Not factoring in construction inflation was a massive oversight."

Another said: "It's going to cost 6 billion ($15 billion) ... "

But Games insiders say cost overruns could be offset by land sales to the private sector once the Olympics are over. Building the Olympic Park in east London was projected to cost 2.37 billion.

The city's mayor, Ken Livingstone, assured Prime Minister Tony Blair and Chancellor Gordon Brown that any overruns would be met by Londoners.

On these figures that amounts to an extra 1000 per household.

This means a steep rise in local council tax is on the cards in London, as the Chancellor is unlikely to meet any shortfall.

The Department of Culture, Media and Sport said: "We are committed to keeping a tight lid on costs, which is why we're involving professional advisers like KPMG now - not three or four years down the road.

"Our financial planning was praised by the International Olympic Committee and so far things have been running smoothly."

- OBSERVER