The Great Olympics Budget Con

The beleaguered Culture Secretary, Jeremy Hunt (on whom bookmakers suspended any further bets in April on him to be next Cabinet minister to leave office), is cock-a-hoop with himself over the announcement today that the Olympics is coming in at almost £500M under "budget" at approximately £9.3BN:

"With only 44 days to go before the Olympics, it is fantastic news that there is still £476m of contingency funds left. Britain has proved that not only can we put on a great show for the world to watch like, we did with the Jubilee, but that we can also deliver big construction projects on time and on budget."

This is remarkable arrogance from a man whose own colleagues, from the Liberal side of the coalition, abstained in today's vote on whether he should face an independent investigation into claims that he breached the ministerial code wrt the BSkyB takeover.

Hunt would do well to remember two things about the Olympics "budget":

1 The original "budget" was in fact £2.4BN, and

2 The £9.3BN figure that the government would have us believe the Games are costing, excludes £2.2BN running costs; the Olympics will in fact cost at least £12BN.

What was that you were saying about being "on budget" Mr Hunt?

It is rather surprising that Hunt isn't very good at budgets/financial matters, given that he seems to be pretty skilled at arranging his tax affairs (wrt Hotcourses)  in a "tax efficient" manner.

 Olympic Medals won during the Beijing 2008 Olympics

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Olympics "Budget" Beyond Belief!

The arguments over the Olympics "Budget" continue, with the Public Accounts Committee laying to Jonathan Stephens the most senior civil servant in soon to be "resigned" Jeremy Hunt's Department for Culture Media and Sport.

The Telegraph reports that the cost of providing security for the games has rocketed skywards, eg elements of the main contract with private security provider G4S (the company that illegally bans photos being taken on public land) have increased by up to seven times.

Liberal Democrat MP Ian Swales said it was “beyond belief” that the Government would have agreed to such a huge increase in the security budget (£86M to £284M) if it had not been forced to do the deal in a hurry having underestimated the original requirement. 

PAC took Stephens to task for this, along with his response to a recent PAC report which described the Olympic budget as “finely balanced”.

Margaret Hodge (Chairman of PAC) quite rightly said that PAC had the right to tell the public the real cost of the Olympics.

For good measure Hodge, again quite rightly,  said it was “dishonest” not to acknowledge that some costs outside the Games budget, such as transport improvements, could be interpreted as Olympic spending.

Stephens claims that he remained “very confident” that the Games would be delivered within the £9.3BN budget.

Which is all very well except that, as has already been pointed out, the "budget" is £12BN!

The whole Olympics "Budget" is in fact beyond belief!

Olympic Medals won during the Beijing 2008 Olympics

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OIympics Budget Cat Is Finally Out of The Bag

The Department for Culture Media and Sport (DCMS), and the rest of the government, are less than pleased that the true costs of the Olympics £12BN (including £2BN running costs) has finally hit the headlines of the mainstream media.

The Telegraph reports that Jonathan Stephens, the senior civil servant at DCMS, has written to Margaret Hodge (Chairman of the Public Accounts Committee) to complain about the fact that PAC have quoted a figure higher than the £9BN sanctioned by the government and dutifully reported by the MSM.

The £2BN running costs will come from the taxpayer (therefore it is a cost). However, the government is so keen to keep the headline figure below £10BN (a psychological breakpoint) that it is using an accounting fudge to hide the extra £2BN (by claiming some monies will be recouped, and others are not "Olympic costs").

Smoke and mirrors will no longer hide this con trick, the budget cat (reported here in 2007) is finally out of the bag and about time too!


Olympic Medals won during the Beijing 2008 Olympics

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Waste!

Despite the fact that Britain is facing years of austerity, and the ongoing crisis in the Eurozone that threatens to collapse the global economy, it is "reassuring" to learn that government ministers are "investing" our taxes "wisely".

What could be a better "investment" than tickets to watch the London 2012 Olympics?

Jeremy Hunt's department for Culture, Media & Sport (DCMS) has applied for, and has been allocated, 8,846 tickets to the London 2012 Olympics.

Isn't it funny that Hunt and his cronies managed to get their full allocation of tickets, yet many ordinary citizens who applied haven't?

Anyhoo, the cost to the taxpayer of this "investment" is £750K.

I am sure that you will all agree that this is money "well spent"!

SNORT!


Olympic Medals won during the Beijing 2008 Olympics

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Scots Want Their Money Back

The Scottish Government is asking for the return of £150M in lottery funds, which it alleges was diverted from good causes to finance the 2012 London Olympics.

Communities Minister Stewart Maxwell has sent a bid document to UK Sport Secretary Andy Burnham.

Maxwell cites the claim as being "a matter of natural justice".

The BBC quote him:

"We are pressing for the return of the money as a matter of natural justice because we believe it is fundamentally unfair that Scottish good causes should suffer to pay for London 2012.

From the smallest arts groups, through sports clubs, to health promotion centres and local day care facilities, we want to see communities embracing opportunities to make change for themselves and help to improve the quality of their lives and those of others."

However, "natural justice" or not, it is unlikely that the claim will succeed. The Department for Culture, Media and Sport, is resisting the claim.

Quote:

"Scotland has received over £2BN in Lottery money since 1994, and around £150M in the last financial year alone. Since the lottery began, over £315M has been spent on grassroots sport in Scotland.

The Olympic Games will bring immense benefits to the UK: a legacy of world class facilities; the inspiration of a generation to get active and take up sport; as well as huge economic and business benefits with £6bn worth of contracts.

London 2012 will leave a lasting legacy for everyone in the UK, including Scotland, which will host Olympic football at Hampden Park.

In addition, 29 locations across Scotland are included in the official guide to pre-games training facilities for foreign teams in 2012."

The Scots don't have a cat's chance in hell of succeeding with their money back claim!

Olympic Medals won during the Beijing 2008 Olympics

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British Government Incapable

Approximately 90% of Britons do not think that the government is capable of managing the 2012 Olympics. That at least is according to a survey taken by Opinion Research.

Only 12% of the 2,000 people surveyed believe that the Games will come in on budget, or within 10% of the budget. The budget currently stands at £12BN (including £2BN running costs), but it could in my opinion hit £20BN.

A government, unsurprisingly, does not quite agree with the opinions of its citizens.

A Department for Culture, Media and Sport spokesman said:

"We have in place the experience and expertise - both within government and The London Organising Committee of the Olympic Games and The Olympic Delivery Authority to deliver a fantastic Games and long term legacy that will benefit millions of people for decades to come."

Why has the budget ballooned from the original tender of £3BN then?

Olympic Medals Won at Beijing Olympics

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The Ostrich Budget

The government received a damning blow to its reputation for "financial competence" (I use that phrase with heavy irony) yesterday, when the Public Accounts Committee accused it of "wishful thinking" over the "budget" (an exaggerated term for the back of an envelope calculations) prepared by those "in charge" of the London 2012 Olympics.

The Committee warned that taxpayers may well have to pay more than the current £12BN (including £2BN running costs) estimated for the games. My own "thumb in the air" estimate is that the final bill will be around £20BN.

The Public Accounts Committee said that the Government excluded key costs from its original budget and more money would be needed, despite an "astonishing" injection of an extra £5BN.

The Committee found serious fault in the way ministers drew up and presented their original budget, and accused the DCMS of ignoring predictable costs.

Edward Leigh, the chairman, said that the department "ignored foreseeable major factors" such as contingency planning, tax obligations, and policing and wider security requirements.

"At the same time, the estimate of the extent to which the private sector would contribute funding towards the Games has proved little more than wishful thinking."

The Committee warned that the revised official public sector funding package "does not include all of the activities on which delivery of the Games and its legacy depends".

In other words, the costs will go beyond £12BN; the government, like an ostrich, has had its head in the sand when it prepared the "budget".

For example, the costs of Government departments working on the Games, as well as the costs of improving wider transport links are outside the budget.

-Why?

-What kind of budget was this?

-Did anyone competent actually participate in its formulation?

Never entrust major long term projects to politicians. They do not have the skills, experience, qualifications or desire to manage them through from start to finish.

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The Olympic Catastrophe

The budget and management of the London 2012 Olympics will get another well deserved kicking next week.

The Commons public accounts committee will publish a scathing report next Tuesday about the Games.

Don Touhig, who is on the committee, branded the ever spiralling budget as likely to go "into the Guinness Book of Records for the most catastrophic financial mismanagement in the history of the world".

Amongst the many budget concerns it seems that the cost of buying land for the Games, and compensating its previous owners, will be £30M higher than originally forecast.

The London Development Agency said the original budget for taking possession of the Olympic Park site in Stratford had been £594 million, but by the end of the last month £578.4million had already been spent.

In reply to a freedom of information request it added:

"The current estimated outturn budget for land and disturbance compensation payments is £624.41 million, with the increase of £30.37 million funded from the approved budget contingency."

Rather perversely the extra costs do not form part of the Olympics budget (which I believe will rocket to £20BN). An LDA spokesman said:

"Such costs are not included within the overall Olympic budget but, in any event, this does not affect in any way the £9.3 billion total outlined by Tessa Jowell to Parliament last year."

Jonathan Stephens, permanent secretary at the Department for Culture, Media and Sport has said that the Olympic project was equivalent to building something twice the size of Heathrow Terminal 5 in half the time.

Well, we all know how "successful" that has been don't we?

The True Cost of The Games

I have stated many times on this site that the true cost of London's Olympics 2012 will be around £20BN; eg in this article published September 2007.

It would seem that, according to The Times, I am right.

Budgets for the Olympics buildings bear little resemblance to reality as costs skyrocket, eg the bill for the aquatics centre is already four times higher than the original bid price.

Jack Lemley, the former chairman of the ODA, has warned that the cost of the Olympics will come to £20BN and that Ken Livingstone and Tessa Jowell had been understating the true costs.

Quote:

"We will never be able to go really public with the full budget.

That was always suppressed and the mayor didn't want any significant growth in these budgets because it would create a bigger tax."

Needless to say, the Department for Culture, Media and Sport deny this.

Time will prove Lemley and myself right.

A Cock Up of Olympic Proportions

Congratulations yet again to the organisers and bureaucrats attempting to "run" the London Olympics 2012, for another cock up.

One of the fundamental planks of the "Olympic strategy" (I wasn't aware that we had one) was that holding the games in London would earn billions from tourism. The government and the Olympics organisers have deluded themselves that the mere existence of the games will encourage thousands of people to come to Britain and spend billions on tourist attractions et al.

Using decidedly dodgy data, that overestimated growth, the government decided that the tourism industry could more or less take care of itself and cut tourism funding by approximately 20%.

The cock up relates to data in the Olympic tourism strategy, which was published in September 2007. This claimed that tourism and leisure grew 4.7% in 2005, compared with growth of 1.1% in the general economy. The government used that figure to justify its claim that a 2004 target to create a £100BN tourism industry by 2010 was achievable.

Needless to say, the figures were fantasy.

The Department for Culture, Media and Sport (DCMS) publicised its autumn performance report three months later, this stated that the actual 2005 figure was a mere 0.4% (8% of the overstated figure).

Unfortunately this revelation was too late to save Visit Britain, the national tourism agency, from being savaged by the government. It has had its budget cut from £55.1M to £45.8M.

Will the government please explain as to why the tourism data was so inaccurate?

These games are going to be a shambles, and the taxpayer will end up footing the bill for many years afterwards.

Olympics Tax Hike

Given the ever ballooning budget for the London Olympics 2012, which currently stands at £12BN, it is hardly surprising that fears are being expressed that the cost of these unwanted games will be supplemented by an increase in council tax.

The Conservatives have reported that the Lee Valley Regional Park Authority has been handed the land and liabilities for the Olympics, leaving it facing the bill for any potential budget overrun.

They suggest that it would be used as a "Trojan horse" to increase local taxpayers' share of the Olympics bill.

However, have no fear, the Department for Culture, Media and Sport (DCMS) has rejected this claim.

A spokesman for the DCMS said:

"The Lea Valley Regional Parks Authority does not have the legal powers to do what is suggested.

There is no way in which any 2012-related cost overruns could be the responsibility of the Park Authority, let alone lead to it seeking to burden council tax payers, in London or beyond, with them.

We have a robust budget for 2012 that will guard against cost overruns."

So that's alright then!

Emergency Funding

In a sure sign the the budget for the London Olympics 2012 is well and truly out of control, and the organisers are panicking, Olympics officials have not ruled out having to spend all of the £2.7BN.

This was set aside to pay for cost overruns on the London 2012 Games.

David Higgins, chief executive of the Olympic Delivery Authority told the Department for Culture, Media and Sport committee the contingency is "prudent".

He said the authority does not intend to ask for extra funds.

Until, of course, he needs them.

They know full well that they have the government by the balls on this, and there is no way that the politicians will be involved with a "failed" Olympics.

Such a pity that it is the taxpayers' money that is being used to prop up the failed careers of second rate politicians.

The budget currently stands at £12BN (including £2BN running costs), we can be assured that the final figure will be much higher.

A Nice Little Earner

As I have often said, the Olympics is not about sport but about money. This point is again illustrated by the publication of the amounts being paid to consultants for the London 2012 Olympis.

These "highly useful" companies/individuals will receive £60M (over £1M per week) for their "services" to the London Games.

Olympics Minister, Tessa Jowell, came clean in a parliamentary written answer that consultants are to receive more than £60M. Funny how shy the government is when it comes to talking about the cost of the Games, yet they are always so keen to make a song and dance and grab the publicity about the Games when it makes them look good.

Jowell's answer admitted that Olympic Delivery Authority (ODA) spent £50.49M in 2006-2007 and between April and July this year spent a further £10.7M.

A large amount of this government largess (using the taxpayers' money) went to five consultancy companies; Atkins, EDAW Ltd, Ernst and Young, Ove Arup & Partners Ltd and Rockpools.

Needless to say, given that the Olympics budget is out of control (£12BN and rising), this revelation could not have come at a more embarrassing time for our "respected" lords and masters.

To add further fuel to the fires, it should be noted that it is not just the consultancy companies that are making a nice living out of the taxpayers. London organising committee chief executive Paul Deighton was paid £536K, even Princess Anne is in on the act receiving £4K for attending up to four board meetings.

There is also another problem for the hapless Jowell, in July she told MPs that the Department for Culture Media nd Sport (DCMS) were employing no consultants in the current financial year and had hired only two in 2006-2007.

Yet the above revelations prove that the answer she gave in July was...errrmmm...wrong!

Seemingly Jowell won't quite admit to lying, instead she has opted for the politician's fail safe by revising the "facts"; hoping that no one will notice.

Quote:

"In my previous answer to the honourable member for Faversham and Mid-Kent on July 9, I stated that the Department for Culture, Media and Sport had not employed consultancy firms to work on the 2012 Olympic Games and Paralympic Games in the current financial year and that two consultancy firms were employed in 2006-07.

However, it has since come to light that during 2006-07 a total of six consultancy firms were employed by DCMS on Olympic-related business. One of these firms continued to work on Olympic-related business in 2007-08 and a further four consultancy contracts had also, as of July 9, been entered into during 2007-08.

The cost of consultancy firms employed by the Olympic Delivery Authority in 2006-07 was £50,494,000 and in 2007-08 (as of July 9) was £10,753,000.

These costs reflect the process of establishing the ODA and building up organisational capacity while ensuring key delivery milestones are achieved."

How blithely she alters the "facts" of her original answer, without so much as an apology or an admission of error.

Is this woman fit for office?

-The budget is out of control
-She has either lied, or else she is massively incompetent

The clear answer is that she is not fit for office, and should be removed with due haste.

Never allow politicians to run long term projects, they have neither the training nor the integrity to do so.

Number 10 Denies Red Arrows Ban

This was posted on the 10 Downing Street website yesterday, in response to the Red Arrows petition:

"The Prime Minister's Office has responded early to a petition on its website declaring "untrue" rumours that the Red Arrows had been banned from the opening ceremony of the 2012 Olympics.

The petition claimed that "The Department of Culture, Media and Sport have deemed the RAF Red Arrows as Unsuitable for the 2012 Olympics because they are too British," but the response to the petition, posted ahead of the closing date, makes clear that the Red Arrows have not been banned from the opening ceremony for 2012 and that no decision on the ceremony has actually been made.

The organising committee of London 2012 will decide what to include in the Opening Ceremony and other celebrations - but with almost five years to go, decisions are yet to be made on what these will look like.

Speaking on the issue, Red Arrows spokesman Rachel Huxford said:

"We have had no discussions about the opening ceremony of the 2012 London Olympics whatsoever. We are still planning our 2008 season at this stage and that is a long way off.

"We understand that no decision has yet been made about the ceremony. We performed when London won its Olympic bid in 2005 after we received a standard request from the Olympic organisers."

Any bets as to what the final decision will be though?

Significant Uncertainties

The National Audit Office (NAO) have warned of "significant uncertainties" over the costs London's 2012 Olympics.

No kidding!

The NAO said the £9.3BN (excluding the £2BN running costs of the infrastructure) was "sufficient to cover the estimated costs of the Games" as plans stood.

However, it then went on to say that this was true only "with the important proviso that the assumptions on which the budget is based hold good".

Which is Whitehall speak for saying that as soon as things change, as is the nature of life, so will the budget.

A pretty lame statement in my view.

The NAO warned that the Olympics involved "a high level of inherent risk".

Tessa Jowell, of the Department for Culture Media and Sport (DCMS), said:

"We are determined to keep an iron grip on costs. That is why we have set in place rigorous cost oversight procedures within Government, including a cross-Government ministerial funders committee and task force to assess any requests for further contingency funding under strict criteria."

She would say that, wouldn't she?

The costs have rocketed from £3BN to £12BN, thanks to the inept and incompetent management by Jowell and the DCMS.

Never entrust a politician with the management of a large scale, long term project.

We can be assured that by the time the Olympics have been held, the current budget of £12BN will have long since been overrun.

No Plan

The ongoing farce more commonly known as the London 2012 Olympics has taken another twist, the much vaunted tourism plan has been delayed for a second time, this time until September.

The Department for Culture, Media and Sport (DCMS), which has been charged with formulating the plan, has postponed the launch again citing the recent reshuffle.

Seemingly not everyone was happy with some of the wording in the proposed document, originally due to be published on 17th July.

A DCMS spokesman said:

"New ministers have come in following the reshuffle and they want to have their own take on it, so meetings have been set up with various bodies from the tourism industry to assess the plan and take it forward."

Hotel chain Travelodge are far from impressed, chief operating officer Guy Parsons said:

"From today up to the 2012 Olympics, is the most crucial time for tourism in decades.

We can't afford any further delays."

The lesson here is never entrust politicians with long term major projects, they are simply not up to the task.

Who's In Charge?

There is confusion at the centre of government today, following new Prime Minister Gordon Brown's changes to cabinet. Specifically the confusion centres on the changes made to the Department for Culture, Media and Sport which is handling the London Olympics 2012.

Tessa Jowell was retained as Olympics minister. However, she lost her job as secretary of state for culture.

Jowell will oversee the Government Olympic Executive (GOE), the DCMS unit responsible for liaising with the games. Jowell will continue to attend Cabinet and report directly to the prime minister, but she will no longer have the seniority of a secretary of state. She will remain chair of the Olympic Board and be answerable to parliament.

Her replacement as culture secretary is James Purnell. In a further twist of the knife by Brown, that signals his displeasure with Jowell, it should be noted that Purnell was a junior minister under Jowell in 2005.

The nature of the muddled re-organisation means that Purnell, despite in theory being Jowell's boss, will have no direct influence over the Olympics.

Jowell put a brave face on her demotion, saying:

"I'm really, really pleased to be continuing as Olympics minister.

It is a cause that I am absolutely passionate about and I fundamentally believe in the power of the games to improve people's lives. There is no question that this is a confusion or a muddle.

I have long said that the Olympics needs enhanced ministerial capacity and Gordon has asked me to do that. The point of placing it in the Cabinet Office is that it reports directly to him and underlines the importance he attaches to it. In functional terms nothing has changed."

By making these changes, Brown has signalled that he does not think that Jowell was up to the Job of running the department. However, by leaving her in charge of the Olympics and appointing her junior to her old position he has ensured that the organisation of the London Olympics will be muddled, confused and lacking clarity of leadership.

In short, it is a recipe for disaster.

2012 Ministry

As noted a few days ago on this site, Tessa Jowell's position of running the 2012 London Olympic Games now looks to be untenable.

The BBC reports that Gordon Brown is actively considering setting up a ministry for the 2012 Olympics.

The Department for Culture, Media and Sport (DCMS), under Tessa Jowell, currently has responsibility for the Games.

Brown seemingly wants a heavyweight to take charge of the Olympics, given the ongoing shambles over the budget this is hardly surprising.

Brown Targets Jowell

Given the ongoing fiasco over the London 2102 Olympics budget (now standing at a whopping £12BN), and the impending coronation of Gordon Brown as Prime Minister, it should come as no surprise to learn that the position of Tessa Jowell (who allegedly is in charge of the Olympics 2012) is under threat.

Brown is reportedly considering three options:

• The 2012 Games would remain under the control of the Department of Culture, Media and Sport (DCMS), but with culture secretary and Olympics minister Tessa Jowell and her sports minister, Richard Caborn, replaced after six years in the job.



• Responsibility for the Olympics to be removed from the DCMS and placed in another Whitehall department, such as the Cabinet Office or Ruth Kelly's Department for Communities and Local Government.



• DCMS to be broken up, and responsibility for the Olympics to be given to the Cabinet Office.

Whatever option Brown chooses, it would seem that Jowell will not be attending the 2012 Games in an official capacity.