London 2012 facing budget shortfall

A $2 billion black hole looms over London.

    The London 2012 Olympics logo [GALLO/GETTY]
    The 2012 London Olympics faced fresh financial concerns after reports that a slump in land prices could leave a $2 billion "black hole" in the budget.

    A report in The Times said Olympic Minister Tessa Jowell's prediction that at least $3.6 billion would be raised in land sales after the Games was vastly over-estimated as it was based on a 16 percent per annum rise in land values.

    The sale of land on the Olympic Park in east London was factored in to repay the National Lottery for money lent to the Games and the London Development Agency (LDA), who acquired the sites that will host the main venues.

    The LDA now expected to raise only $1.6 billion from the sale of land after estimates of land price inflation were scaled back in the light of a slowdown in London property prices, according to The Times.

    The Department of Culture Media and Sport (DCMS), which is responsible for managing central government funding, said the report was misleading.

    "There is absolutely no black hole in the 2012 finances, and these claims are completely misleading and a distortion of the facts," a DCMS spokesman said.

    "The ($1.6 million) quoted is the most cautious of a range of LDA projections of how much might be raised by land sales in the Olympic Park, based on 6 percent per annum growth.

    "This is significantly less than the average rate of increase over the last 20 years; a period that has included both economic highs and lows.

    "Experience suggests it is entirely realistic to believe that our target of repaying the Lottery will be achieved."

    Lottery funding

    In March last year, Jowell confirmed the budget for building the Games venues and infrastructure had more than doubled to 9.3 billion pounds and asked for another $1.4 billion of National Lottery funding.

    The total amount of funding to be provided from the National Lottery is $4.3 billion, half of which will be diverted away from other causes, leading to criticism from arts organisations who rely on Lottery funding.

    Opposition MPs questioned the repayment of Lottery funding at a House of Commons debate on the Olympic budget.

    However, Neale Coleman, the London Assembly's director of business planning and regeneration, said the actual figure raised from land sales could even top $3.6 billion.

    "I believe it is realistic to expect to get more than the ($3.6 billion)," he told MPs.

    "If land values increase in the next 20 years like they did in the last 20 years we would bring in (six billion) through land sales."

    The Olympic Lottery Distributor moved to play down fears of a draining of money to good causes on Tuesday, although it said that all the other distributors of Lottery funding apart from UK Sport would lose money to the Olympics.

    "It's very difficult to be precise about land values but I'm confident that there will be a significant return of Lottery money," the Olympic Lottery Distributor's chief executive Mike O'Connor said.

    SOURCE: Agencies


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