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"DEPARTMENT FOR CULTURE, MEDIA AND SPORT OLYMPICS Government Response to ‘A London Olympic Bid for 2012’ (HC 268) Report of the Culture, Media and Sport Select Committee Session 2002–2003 Presented to Parliament by the Secretary of State for Culture, Media and Sport by Command of Her Majesty June 2003 Cm 5867 £4.50 © Crown Copyright 2003 The text in this document (excluding the Royal Arms and departmental logos) may be reproduced free of charge in any format or medium providing that it is reproduced accurately and not used in a misleading context. The material must be acknowledged as Crown copyright and the title of the document specified. Any enquiries relating to the copyright in this document should be addressed to The Licensing Division, HMSO, St Clements House, 216 Colegate, Norwich NR3 1BQ. Fax: 01603 723000 or email: licensing@cabinetoffice.x.gsi.gov.uk GOVERNMENT RESPONSE TO THE CULTURE, MEDIA AND SPORT COMMITTEE REPORT ‘A LONDON OLYMPIC BID FOR 2012’ (HC268) The Government welcomes the close interest shown by the Culture, Media and Sport Committee in a possible London Olympic bid, and has taken the Committee’s comments and recommendations into account in deciding whether or not to support such a bid. As the Committee will know, on 15 May the Government announced to Parliament its intention to support a bid by the British Olympic Association to stage the 2012 Olympic and Paralympic Games in London. In reaching its decision the Government has looked carefully at the impact of a bid using the key criteria of affordability, deliverability, legacy and winability. The Government believes that all these criteria can now be satisfied. As the Committee has emphasised, a robust and sustainable funding package is fundamental to the development of a high quality London bid. Working in close partnership with the other key stakeholders, and in particular the Mayor of London, the London Development Agency and the British Olympic Association, the Government has developed a funding package to underpin its position as the ultimate guarantor for the Games in the event that the bid is successful. Fuller details of this package are set out at (ii) below and at Appendix A. The Select Committee’s report contained a number of key conclusions and recommendations. (i) The process followed by Government has produced in public no more than an anaemic 12 page summary of a 250 page document containing only impenetrable, estimated, aggregate costs. We were grateful to receive confidential copies of the full report containing financial estimates for a “specimen” Games. However, this was of limited use for the purposes of accountability and none whatsoever with regard to public debate. As the Committee acknowledged, the Government has provided copies of the report on a restricted and confidential basis. As the Committee is aware, the Government’s view is that the full report includes commercially confidential information, and other material that might be of assistance to other applicant cities. The Government would also wish to emphasise that Arup’s remit was to produce a specimen proposal for the Games, and that the detailed arrangements for staging them will now need to be developed by the organisation to be set up by the three main stakeholders, Government, the Mayor of London and the BOA, to manage the bid. The Government has encouraged a full debate of the issues in public and Parliament and made available the key facts and analysis to ensure that the debate is well informed. Opposition spokespersons were also offered a detailed briefing on the work being undertaken in relation to a possible bid. The bidding process itself will be governed by the rules and requirements of the IOC, and involves a high degree of transparency in relation to the component elements of the bid. (ii) There are three key questions that the Government needs to answer before being able to commit itself to a bid (and any such commitment will be all the better, easier and the more convincing to the IOC for this work having been done): — that the costs and risks are understood as far as possible at this distance from the event, can be afforded and are justified in comparison with other sporting and wider spending demands on Government; 1 — that the challenges and implications of delivering the necessary facilities and infrastructure are understood and catered for; that any infrastructure legacies created will be free from ongoing, possibly openended, subsidy necessary from the public sector. — The Government has undertaken detailed analysis of all the costs and risks and has worked closely with key stakeholders to ensure that the potential impact of a bid is fully understood. So far as revenues are concerned, the assumption, based on the Arup report, is that in excess of £2 billion will be available from a combination of the sale of rights, tickets sales, sponsorship and other commercial support for the Games. The public funding element of the package contains significant provision for risk and contingencies (more than twice the level of public subsidy suggested in the Arup report) in case overruns, unforeseen costs or revenue shortfalls arise as the project nears completion in 201012. The level of public subsidy provided for within the package is as follows: ● ● ● ● National Lottery Council Tax LDA Total £1.5 billion £0.625 billion £0.250 billion £2.375 billion The Government wishes to emphasise that this is not the budget for the Games. The anticipated allocation of public funds to the budget will be significantly lower than this, but before reaching a decision to support a London bid the Government was determined that there should be sufficient funding in place to cater for all reasonably foreseeable eventualities in staging them. The probability based risk assessment we have undertaken on Games’ costs and revenues provides further reassurance that £2.375 billion represents an acceptable level of provision for potential contingencies. Any residual risk that this level would be exceeded can be reduced through strong management intervention during both the bidding and staging periods. In the unlikely event that further public subsidy is required, the Government expects its responsibility as the ultimate guarantor of Olympic funding to be discharged in a sharing arrangement with the Mayor of London and through seeking additional National Lottery funding. These expectations will be reviewed in 2005 once work on planning and costs has been completed and the outcome of the bid is known. A copy of the Memorandum of Understanding that has been agreed between the Government and the Mayor of London can be found at Appendix A. Lessons learnt from previous major projects such as the Jubilee Line Extension, the Millennium Dome, the National Stadium project and, most recently, the Manchester Commonwealth Games have been incorporated into the analysis to ensure that the challenges and risks that would be associated with staging a London Olympics are properly identified. The Government and its partners will put in place robust planning and delivery mechanisms, operating at arms length but fully accountable for the use of public funds, to ensure the efficient and effective delivery of a London bid. During the bidding period we will be carrying out further detailed work to ensure that the organisational structures for the actual staging of the Games would be similarly robust. The Government will wish to see the legacy benefits of any Olympic investments maximised. (iii) We are confident that the Government has undertaken more and better appraisal than previous bidders in order to tackle the vagaries of estimating the costs for a huge and complicated project nine and a half years away from the final delivery date. We trust that the IOC will take note of the implications of all this effort in any future judgments it may make on a London bid. Crucially, we expect the Government to finalise, and reconcile, the various strands of its appraisal work and to be able to set out clearly and in detail what its conclusions are, their bases, and how they influenced its decision on whether to bid or not. 2 The Government welcomes the Committee’s endorsement of the rigorous approach it has taken to the analysis and appraisal of the implications of bidding for the Olympics. That approach has also drawn favourable comment from Jacques Rogge, the President of the IOC. In its memorandum of evidence to the Committee, the Government drew attention to a number of ongoing strands of work relevant to a decision on whether or not to support an Olympic bid, and the Committee may find it helpful to have the following update on those: Affordability We have considered the possible diversion of funds from other schemes and projects to support the Olympics. ● National Lottery: the Lottery will contribute up to £1.5 billion, primarily from new Olympic Lottery Games (the introduction of which will require primary legislation) and the existing sports Lottery stream (to meet the costs of elite sport and associated sports investments). It is estimated that around £750m will be generated by the new Lottery games, around 50% of which might represent money diverted from existing good causes. This diversion would represent some £55m per year about 4% of annual income to good causes from the Lottery. These calculations are based on prudent assumptions about the likely impact of Olympic Lottery games, provided by Camelot, and have been reviewed by the National Lottery Commission. Up to £340 million would be sought from the established Lottery sports distributors. The remaining contribution, were it needed, could be derived by changing the shares of Lottery income passing to existing distributors beyond 2009 when the current agreement on percentages to good causes is due to come to an end. This would represent a further reduction of up to 7% for the other good causes. This far ahead it is difficult to assess what the effect might be on individual programmes, but the objective will be to ensure than any adverse impact is minimised and that the anticipated benefits arising from the staging of the Olympics are shared as widely as possible. The Olympics will be a national, and not just a London event, and the potential opportunities arising from it will flow to all levels and well beyond the sports sector. For example, provision has been included for a nationwide cultural programme, funded via the Olympics project, and spanning the four year period up to and including 2012. Council tax: the Olympics Precept would not require expenditure to be diverted from existing or planned programmes. LDA contribution: any necessary LDA contribution towards the Olympics would form part of its wider investment programme for the regeneration of the Thames Gateway. Until the outcome of the bid is known the LDA will only acquire land which could be used for regeneration purposes should the bid not be successful. ● ● Deliverability The Government has made it clear that it would not support a bid for the Games if it were not confident that we could stage them to good effect. As emphasised in its response to (ii) above, the Government is determined that the lessons from earlier major projects should be both learned and applied in putting together the arrangements for managing an Olympics bid. In partnership with the Mayor of London and the BOA, we will establish a company to manage the bidding process which will operate at arm’s length from Government. The Chair of this company will have significant authority and responsibility for delivering a high quality and competitive bid. The key bidding documents, including the Applicant Questionnaire and the Candidature File will, however, require signoff by the three key stakeholders. The bidding company’s costs are being underwritten jointly by the Government and the LDA, although we anticipate that there will be a significant contribution from the London business community. The further work undertaken on transport arrangements is discussed under (viii) below. 3 Legacy As discussed in (v) below, the bidding organisation will be expected to take account of legacy considerations in developing its proposals for the bid. The potential for an anchor tenant for the main stadium, for example a football club, will form part of this work. The Government believes that bidding for and hosting the Games will deliver many benefits for sport. An Olympics bid would support the vision for sport for the next decade as expressed in Game Plan, the joint Strategy Unit and DCMS report for sport development. Hosting the Games would provide the UK’s elite athletes with an unparalleled opportunity to showcase their talents on home territory to a global audience. Government investment in talent development and elite sport will continue to provide our athletes with the best possible chance to excel at a London Olympics and win medals. Elite athletes are a continued source of encouragement to young and old alike. We want to harness the inspiration of their example, and the prospect of hosting the Games to drive up participation in sport. We know that sporting success motivates people to try playing sport, but all too often lack of access, opportunities to play and coaches means that enthusiasm is short lived. We are building a national framework for sport which will provide those opportunities, and that determination is demonstrated by our investment of £1.2 billion in school and grassroots sport. The Government is currently funding initiatives to continue to 2006 to improve sport in schools, assist amateur sports clubs, and improve coaching and talent development. Hosting the Games will also leave a legacy of new and improved sports facilities around the country, some world class, which, with careful management, will be of lasting value to sport and the wider community. The LDA is in the process of commissioning Masterplanners to ensure that the plans for staging the Olympics are properly integrated with the wider regeneration proposals for the relevant part of the Thames Gateway area. The Arup report identified a number of potential impacts flowing from a London 2012 Olympics. These included direct economic impacts through increased tourism, job creation, the regeneration of the Lower Lea Valley and inward investment and wider social benefits relating to health, sporting participation and culture. Our work supports Arup’s broad conclusions although the anticipated range of benefits is difficult to quantify, particularly at this early stage. Going forward the challenge will be to design the bid and staging of a London 2012 Olympics in a way that maximises these wider benefits for the country; this will be a key consideration informing the bid. Winnability The Government’s broad assessment remains as set out in its memorandum of evidence to the Committee. In addition to London, the following cities have to date confirmed their intention to bid for the 2012 Games: Havana, Istanbul, Leipzig, Madrid, Moscow, New York and Paris. All are expected to prepare strong bids, and our view remains that there is no clear favourite at this stage. The arrangements we are putting in place to manage and present the bid to the IOC are geared towards enhancing its chances of success. (iv) London might well end up with a stadium at Wembley, specifically built with the capability to host the Olympics without legacy issues, and another in East London, actually built to host the Games, with an uncertain future. If this duplication were in fact to occur much of the responsibility would lie with the sporting bodies and agencies whose discussions with each other, and with Government, have led to this confusion. 4 (v) The most serious and creative thought needs to be given to the longterm future of an East London stadium before a single word of the design brief is written. All options should be considered from temporary construction and subsequent demolition, to a full range of alternative uses after the Games. Such uses could include sporting, retail, leisure or residential adaptation (or any combination thereof). We recognise, therefore, that there could be a creative legacy option developed in due course. However, we recommend that, for the purposes of the bottom line of the bid, the Olympic stadium be costed on the basis of construction and demolition. The construction of the new national stadium at Wembley is progressing well. As the Committee has suggested, the new stadium will be capable, inter alia, of adaptation to stage major athletics events. Those responsible for assembling the bid will be expected to determine the extent to which Wembley National Stadium is used for staging Olympic events. So far as the main stadium for the Games is concerned, they will need to consider a wide range of options, including the potential for the use of temporary or convertible facilities. As indicated in response to (iii) above, securing a longterm anchor tenant (sports or otherwise) will also be amongst the options to be considered, but as the Committee suggests, the Government is not ruling out subsequent demolition of the stadium as a means of avoiding the need for ongoing public subsidy. (vi) First, however, the Government must satisfy itself that the fundamental proposals for a privately developed village and construction of any kind of stadium are in principle realisable and deliverable between 2005 and 2012. The bidding organisation will be expected to produce coherent, fully costed and practical plans for these and the other facilities needed to support the bid. (vii) We cannot insist strongly enough that, whatever new agencies are established, leading unequivocally from the centre should be a Minister, located in the Cabinet Office or even No 10, and with an explicit cross governmental remit and the power and personality to make things happen. This should be established from day one, 31 January 2003, and should include arrangements for liaison between that Minister and the Prime Minister as a matter of course. The leadership issue cannot be allowed to languish for one minute if a positive decision has been taken..."

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