Government Denies 2012 ‘black Hole’

The government has promised that it will not raid the Lottery for extra funding for the London 2012 Olympics after speculation that a slump in land prices could leave a £1bn ‘black hole’ in the Games budget.

Reports claimed that Olympic Minister Tessa Jowell’s prediction that at least £1.8bn would be raised in land sales after the Games was vastly over-estimated as it was based on a 16% 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 £800m from the sale of land after estimates of land price inflation were scaled back in the light of a slowdown in London property prices.

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

Commented a DCMS spokesman: ‘There is absolutely no black hole in the 2012 finances, and these claims are completely misleading and a distortion of the facts. The £800m 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% 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.’

In March last year, Jowell confirmed the budget for building the Games venues and infrastructure had more than doubled to £9.3bn and asked for another £700m of National Lottery funding.

The total amount of funding to be provided from the National Lottery is £2.175bn, half of which will be diverted away from other causes, leading to criticism from arts organisations who rely on Lottery funding.