Livingstone Reveals Row Over Olympics Contingency Fund

A row has erupted over whether there should be a multi-billion pound contingency fund to cover the costs of the 2012 Olympics project going wrong, Ken Livingstone revealed today.

The London mayor claimed the Treasury was arguing that a fund equal to 60% of the overall budget should be set aside to cover cost overruns.

Addressing mayor's question time at the London Assembly, Mr Livingstone said the proposal was "breathtakingly ridiculous" and would be a "green light" for developers to "screw up" the construction of the project.

The comments came at a time of intense negotiations about a revised budget for the 2012 games.

The initial estimate of £2.4bn to build the venues is expected to increase substantially to cover the additional costs of regeneration, security and possibly VAT.

Now it has emerged there is also likely to be an extra contingency fund on top of 20% already agreed to cover unforeseen costs.

Mr Livingstone said he would be prepared to accept an additional fund equal to 20%, but revealed that David Higgins, the chief executive of the Olympic Delivery Authority (ODA), was calling for a fund of 30%, and said the Treasury wanted 60%.

"If you start out on this huge infrastructure project and say it might overrun by 60%, everybody bidding for contract knows you have set aside this huge pot of money for when they screw up," he said. "That sends all the wrong signals."

A Treasury spokesman said the government was "reviewing the costs" of the games, but added: "We are not going to give a running commentary on this."

On other additional costs, Mr Livingstone said there would need to be up to £1.5bn to cover the cost of regenerating the Lower Lea Valley, and around £450m to cover additional security.

He claimed the possibility that the costs of the games would be taxed was a "book-keeping problem that is easily resolved" and repeated his pledge that Londoners would pay no more than 38p per week extra in council tax to fund the games.

Earlier, Mr Higgins and the acting chairman of the ODA, Sir Roy McNulty, repeatedly refused to tell the Assembly how much extra Treasury money they were negotiating for and declined to discuss the size of the contingency fund.

However, Sir Roy admitted the sums involved were "significantly higher" than the original estimate of £2.4bn.

Mr Higgins and Sir Roy were called before the assembly after the sudden resignation of the US businessman Jack Lemley as the chairman of the ODA.

Mr Lemley later told his local paper, the Idaho Statesman, that the costs of the project were likely to rise on an "exponential basis".

A tape of his interview with the paper was played at the Assembly hearing. In it, he said: "There is a going to be huge difficulty in completion, both in terms of time and money."

Sir Roy, however, insisted the programme was on schedule, and said costs were "not going to rise on a exponential basis."

Mr Higgins revealed the ODA was no longer in negotiation with West Ham United, or any other football club, about funding the costs of the main stadium.

He said it was "unlikely" that a club would come up with the £150m needed to make the stadium suitable as a future venue for football.

Sir Roy also hinted that Mr Lemley had been sacked from the project. "There were issues between Jack, the ODA board and other stakeholders on the project," he said.

"The mismatch between Jack and our environment here led to serious differences, and it was decided that it was everybody's interest if Jack returned to pursue his business interests in the United States."

He added that a financial settlement had not yet been agreed with Mr Lemley and the government.

Mr Livingstone said he had to remind Mr Lemley that he was only the chairman of the ODA, and was not in charge of the organisation.