British government hits back at critics of 2012 budget

LONDON, Nov 15 (Reuters) - The British government has defended itself against accusations that the initial budget for the London 2012 Olympics was grossly underestimated.

In March the cost of the project was raised to 9.3 billion pounds (19.03 billion dollars) -- more than double the figure quoted during the bid process -- including a contingency fund of 2.7 billion pounds.

Jonathan Stephens, Permanent Secretary at the Department for Culture Media and Sport (DCMS), was accused by MPs of ''grossly underestimating'' the cost of the Games when the bid was finalised in 2005.

Yesterday, the Public Accounts Committee heard that all of the contingency fund, factored in to cover rising building costs and inflation, would more than likely be used.

Edward Leigh, the committee's chairman accused the government of ''sheer incompetence'' over its handling of the budget, but a spokesman for the DCMS said costs were being tightly controlled.

''If you have a contingency fund you have to be prepared to use it,'' a DCMS spokesman said today. ''But we are absolutely determined to bear down on costs wherever possible.

''That's why we have set up a ministerial funding committee to vigorously scrutinise any applications for use of the contingency fund.'' So far 380 million pounds of the contingency fund has been spent by the Olympic Delivery Authority (ODA).

The Olympic Stadium, the design for which was unveiled last week, will cost 216 million pounds more than in the original bid document, taking it to 496 million pounds.

''A paper bid is completely different to a living, breathing Games project,'' a DCMS spokesman said. ''Every bidding city faces this. We always knew we would have to revisit the budget.'' REUTERS AB VC2240