London Games said to face 1 billion pound shortfall

LONDON - The 2012 London Olympics faced fresh financial concerns on Tuesday after reports that a slump in land prices could leave a one billion pounds "black hole" in the budget.

A report in The Times said Olympic Minister Tessa Jowell's prediction that at least 1.8 billion pounds would be raised in land sales after the Games was vastly over-estimated.

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 800 million pounds 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 on Tuesday.

"The 800 million pounds 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.

"The LDA's forecasts ranged from 800 million pounds to more than 3 billion pounds. Experience suggests that it is entirely realistic to believe that our target of repaying the National 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 700 million pounds of National Lottery Funding.

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

Opposition MPs were expected to oppose the extra Lottery funding at a House of Commons debate on the Olympic budget later on Tuesday.

"It was bad enough when we heard the Lottery was taking a hit of more than a billion, but if it turns out there is no chance of getting any of this money back it would be a disaster," David Barrie, the director of The Art Fund, told The Times.

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

"It's very difficult to be precise about land values but I'm confident that a large percentage of the money will be paid back," the Olympic Lottery Distributor's chief executive Mike O'Connor told Reuters.