The TaxPayers' Alliance - 2012 Watchdog

Olympian Inferno

Gee-whizz stats from the Olympic Park

The National Audit Office has just published its latest update on the 2012 money inferno. They highlight three major concerns:

1. Security budget

Unbelievably, three years after winning the games, and three years after Sir Ian Blair bragged to Today listeners that we'd won in large part because his police force was recognised as a world leader in security (approx 20 mins before the 7/7 bombs went off), the Home Office still hasn't got a security plan capable of being costed. The NAO says:

"In the continuing absence of a fully costed plan, there is not a firm basis for taking forward the wider security arrangements for the Games, or for making sure that wider security requirements have been fully reflected in the planning and delivery of other activities within the London 2012 programme, including the construction of the venues, transport and staging."

In other words, while the security plan is still flapping around, there's no way we can know any of the other major costs are right. 

2. Olympic Village

As we blogged yesterday, the funding arrangements for the Olympic Village are in melt-down. This report tells us the total cost will be in excess of £1bn, which was originally to be funded largely by the private sector. But post-credit crunch that's a non-starter, and all work so far has been funded by taxpayers. The NAO says:

"Given the uncertainty over potential cost pressures on the Village project, and the ongoing consideration of alternative ways to finance the deal, it is not possible at this stage to determine the impact on the budget for the Games."

Clear enough.

3. Legacy planning

Extravagant claims about so-called legacy were a key element of London's original bid. Yet no serious planning has been done, and cost pressures point to downsizing. But as we've blogged before, the organisers have to satisfy the IOC that they are delivering on their bid commitments. Pulled two ways - a classic recipe for faffing around. Planning deadlines have fallen by the wayside, and the NAO says:

"The continuing legacy planning could affect the assumptions underpinning the Olympic Delivery Authority budget and the specifications it has agreed with contractors, with any late changes impacting on time and cost or on deals negotiated with developers."

Yes, it's those pricey "late changes" again- a chronic problem with all public sector projects.

The NAO is doing a good job with these 2012 reports. True, they make dismal reading, but they are building up into a systematic and invaluable record of just how incompetent and expensive our grandstanding rulers can be.

PS Those gee-whizz stats really are gee-whizz... eg the amount of contaminated soil to be washed would fill 10,000 Routemaster buses, and the cut soil would fill 20,000... although, couldn't we just have had the Routemasters left alone to ply London's streets?

2012 - Groping In The Dark

Does anyone actually know what's going on?

Following the publication of MayorJohnson's special report on the costs of the 2012 Olympics, he was interviewed this morning on BBC R4 Today.

He was asked about a "secret" Memorandum of Understanding signed last year between Mayor Livingstone and the government, spelling out who picks up the inevitable further cost over-runs of 2012. Would Johnson now publish it?

Boris responded by saying he doubted if it even existed.

Both question and answer were rather surprising, given that the Memorandum of Understanding in question is already published and freely available to all on the Department for Culture Media and Sport website. Which vividly underline how confused everyone now is, not only about total 2012 costs, but how those costs will be divvied up between London Council Tax payers and taxpayers generally.

As for the Mayor's special report itself, it's a good summary of many points already familiar to BOM readers (see previous blogs gathered here). But it does contain one or two further alarming details for taxpayers.

For one thing, it seems that the Olympic Delivery Authority has totally failed to deliver on its key pledge to employ only fixed-price construction contracts. It now turns out that for both the main stadium and the Aquatics Centre, it's accepted much riskier open-ended cost-plus arrangements, just like in the bad old days of wild over-runs:

"Both contracts are target cost rather than fixed price as it would not have been economically viable to seek to secure this. The ODA are realistic about the significant level of risk that remains within these contracts."

Which is no comfort.

When they got us into this mess, there was much macho talk from the "organisers" about how they would slam contractors up against the wall and make them accept keenly priced fixed price deals. On BOM we always said that was ludicrous pie in the sky (eg see this blog more than two years ago). So we were 100% right and they were 100% wrong. But somehow that doesn't that make us feel any better.

Then there's the Olympic Village, which was originally supposed to be largely funded by the private sector. We're now told that the private sector no longer wants to fund it - if it ever did. Instead, we taxpayers are having to step up, against a laughable promise that the flats and houses will be so valuable post-2012 we'll get our money back from sales.

TINA is back in town, as we always knew she would be. Time is running out and we have no choice. The "organisers" have now given the developer, Lend Lease, the go-ahead to start building "even though no Development Agreement has been agreed". Translation: a housing project costing many hundreds of millions is going ahead on a wing and prayer, with the taxpayer picking up whatever financial consequence may arise.

Current cost meter reading to date? According to the report, the main venues are currently running £106m over the supposed final FINAL costs agreed last November. Naturally, the DCMS disputes that, arguing the over-run is only £16m. But that's only because other bits of the project have been hastily canned to balance the numbers. Just one teensy problem with that - the canned bits include items that will almost certainly have cost knock-ons further down the line, eg:

"ODA value engineering exercises to contain costs and achieve savings have inevitably reduced planned spend in areas that are vital for legacy such as landscaping. Early business planning... has already identified the need for additional investment in the park to achieve the standard and quality of legacy park... The LDA is also concerned about potential shortfalls in the transformation budget for venues. It is not clear that the existing budgets will provide turnkey legacy facilities at either the Stadium or Aquatic Centre."

It's the same old same old. Grandiose projects, wishful thinking, wholesale salami slicing, short-term savings at the expense of long-term costs (now referred to as "value engineering")... anyone would think Big Government was a lumbering brainless over-priced dinosaur that can't even tie its own shoe laces.

PS After the Johnson interview this morning, Livingstone phoned in. And he was very explicit about a point about which he'd been quite circumspect while in office - the reason he backed the Olympics was so London could get its hands on at least a small part of the £20bn pa it has to hand over every year to fund the rest of the country. Put that way, many Londoners might see the point. But having to pay for a wasteful circus like the Olympics just to "get back" some of your own money, is a shocking testimony to just how badly Britain's huge fiscal centralisation serves London and the Greater South East (eg see this blog).

Still Soaking Up Cash

We order you to wiggle around a bit

This government has always believed that bossing us about can produce a better world. And it's always been happy to waste huge amounts of our money on any manner of hopeless programmes based on that belief.

So it's no surprise that this morning we're given a dopey plan to get us couch potatoes swimming and walking more. The government will spend £140m of taxpayers' cash on free access to local authority swimming pools for the over 60s and the under 16s. They will spend another £7m on programmes to get us walking more. And they will spend a whole £1m - yes, a whole £1m - on subsidised access to private gyms for 16-22 year olds. Total spend: £150m.

Except of course, that's just the headline. The reality is somewhat less clearcut.

To start with, our public swimming pools are operated by local authorities, and Whitehall can't actually make local authorities provide free pool access. Hence DCMS talks only of "encouraging" them to do so.

Second, what makes anyone think it's the cost of a pool visit that's the key factor stopping the potatoes taking the plunge into those often grotty pools? The key factor is almost certainly not cost, but simply that they don't want to. Sure, that £140m will get spent, but it will largely go on admin and to people who already swim - it's what's known as a deadweight cost.

Third, this isn't really about getting us to take up swimming at all, but box-ticking. It's about demonstrating to the International Olympic Committee that Britain is taking steps to deliver on that 2012 "legacy" promise. Because as you will recall, it was the grandiose promises about legacy that got us into this mess in the first place. This is really about saving face.

One final question - where's the cash actually coming from? We hope it's just a deckchair rearrangement within existing DCMS budgets. But given the record, you wouldn't want to bet on it. Another £150m into the 2012 sink.

PS As BOM readers will know, there's zero evidence that any of these expensive commissariat programmes for bossing us into getting fit have ever worked. The notoriously useless programme for tackling childhood obesity has cost us in excess of £1bn, but the number of obese children is higher than ever (eg see this blog).