KEY POINTS:
Planners of the 2012 Olympics admitted for the first time yesterday the cost of building the Games would be "significantly higher" than previous estimates.
The original architects of the London Games have hitherto claimed that £2.4billion from the public purse was a robust figure but that now looks certain to climb above £5billion.
An emergency debate at the Greater London Authority yesterday was prompted by the recent resignation of the project's engineer-in-chief, Jack Lemley, who went on to claim the Olympics were running behind schedule, were over budget and prone to political interference.
Sir Roy McNulty, the acting chairman of the Olympic Delivery Authority (ODA), which is responsible for building the Games, admitted "there were issues between Jack and the ODA and other stakeholders.
There was a mismatch that led to serious differences and it was in everybody's interests that he return to the US".
Mr McNulty's remarks were a change of tune from the previous official line which said only that Mr Lemley left to attend to his engineering consultancy.
Although there was no official confirmation of a new Olympic's budget - a Treasury review is expected to conclude by Christmas -- £5billion is considered a conservative estimate.
Further pressure on costs has come because the ODA is not exempt from VAT as previously thought.
The Olympic's bill will also increase due to security and the widening scope of the regeneration of the Lower Lea Valley, the low rent industrial site earmarked for the Olympic Park in the East End.
Nervousness surrounding Games finance was further underlined by the fact that a new budget will include a "contingency" fund of up to 60 per cent.
Building in such a large margin for error, as desired by the Treasury, was described yesterday by London mayor Ken Livingstone as "absolutely, breathtakingly ridiculous".
He prefers a 20 per cent figure and said that 60 per cent would "send out the wrong signal" to potential Games contractors to hike their prices.
Sources at the GLA say the 60 per cent figure is a Treasury shot across the bows to other government departments to budget for the Games.
Mr Livingstone said he would reluctantly sanction a 20 per cent increase to preserve the "unanimity" on the Olympic Board.
He could offer no guaranteed council tax cap - Londoners pay an average 38p per week towards the Games.
To plug any potential gap he raised the prospect of a windfall charge on property developers in the East End where prices are rising due to the forthcoming Olympics.
The mayor also called on the government to waive a 12 per cent tax on the sale of Olympic Lottery scratch cards.
Mr Livingstone dismissed estimates that Games security would rise to £1billion as it did for the 2004 Athens Olympics.
Policing the Games will cost £300million and securing the Olympic Park is bound to increase from the £190million estimated before the July 7 attacks in the capital.
In his parting shot, Mr Lemley also touched on concerns that the main Olympic stadium would be added to a long list of white elephants created by previous Olympics.
Lemley said that an 80,000-seat stadium could not easily be converted to a 60,000-seat venue for a Premiership football club, such as West Ham or Tottenham, a notion backed by the government.
David Higgins, chief executive of the ODA said it was now "highly unlikely" that such a club would meet the £150million cost of this and the stadium would most likely become a 25,000-seater venue mainly for athletics after 2012.
Mr Higgins said it would be a "waste of public money" not to dovetail the Olympic project with a broader regeneration of the so-called Thames Gateway area.
Original plans to create 9,000 new homes have been extended to 35,000 homes, bringing an estimated 50,000 jobs to the area.
Mr Higgins said: "It would be a significant waste of public money not to put in the utilities and infrastructure for the community that will have had to put up with six years of disruption."
- INDEPENDENT
