My right honourable friend the Minister for the Olympics (Tessa Jowell) has made the following Written Ministerial Statement.

Please find below details of the decisions taken at yesterday’s meeting of the ministerial funders group and of the Government Olympic Executive’s first quarterly economic report, which is published today.

Funders Group Meeting—12 May 2009

The funders group met yesterday and agreed that a further £324 million of the Olympic public sector funding package would be invested in the Olympic village.

The funders decided that a public sector approach offered better value for money than a deal with private developer Lend Lease and would cost substantially less public money in the long term. The terms of the Lend Lease deal had been materially affected by the economic downturn, such that it no longer offered best value for money. Previous releases of contingency (totalling £326 million) have kept the progress on site on track over the past year.

The decision to make a further £324 million available to the ODA makes a total of £650 million being made available to deliver the village for the Games.

This further investment now means the public sector will own the village and receive returns from sales after the Games.

Over the medium to long term, as the market improves, the ODA will seek alternative private investment and management for the village on terms more favourable to the taxpayer. At least all the additional £324 million public investment being made today from contingency and savings is expected to be returned after the Games when the flats are sold.

To fund this investment, the funders group agreed to release £324 million of public funding from within the Olympic budget. Of this, £261 million comes directly from the contingency fund while £63 million is from savings made elsewhere across the ODA’s programme.

Following a competitive tender process the ODA was in discussions with developer Lend Lease about private sector investment into part of the village development. Lend Lease has already been appointed construction and development manager and this remains unchanged.

Lend Lease and its banking consortium were prepared to invest up to £150 million of equity, involving a return to Lend Lease, and £225 million of bank debt to finance part of the construction and development costs.

However, the current economic climate has resulted in the private sector becoming more risk-averse and, for the deal to proceed, the ODA would have had to carry an increased level of risk.

After careful assessment it is clear that the publicly funded option will provide the best value for money over the longer term.

It was also confirmed today that agreement in principle has been reached for a further £268 million to be invested in the village through the pre-sale arrangement for the affordable housing element. This funding is separate to the Olympic budget and made up of grant from the Homes and Communities Agency (HCA) and lending from a private sector banking consortium on commercial terms.

This means the funding for the village has now been confirmed. The total cost of the village, including £147 million of post-Games development costs, can now be confirmed as £1,095 million. This will be funded using:

£650 million of public investment; and

£268 million of funding for social housing with the balance funded from sales of private housing.

Our valuations demonstrate that at least all the contingency being invested today and the balance needed to meet the total cost of the village will be recouped in sales. It is impossible to know exactly how much will be recouped from private housing sales, given the uncertainty of the market, but independent analysis has supported the valuation used.

Construction work on the village started on schedule last June and remains on track with building now under way on four of the 11 residential blocks.

Quarterly Economic Report—May 2009

I have today published the Government Olympic Executive’s first quarterly economic report—London 2012 Olympic and Paralympic Games Quarterly Economic Report May 2009.

The report explains the latest budget position including the impact of the decisions made at the funders group meeting on 12 May 2009.

Due to cost savings and good management the overall forecast cost of the programme has reduced by £179 million since our last report in January to £7.234 billion—being £865 million less than the maximum budget available.

It also outlines the progress that has been made since January 2009 on providing support for businesses and individuals through training, apprenticeships and other initiatives.

The report shows that, after taking into account the £324 million made available to the ODA yesterday, around £1.3 billion of contingency remains unreleased and the overall programme remains on time and within budget.

It also demonstrates the real impact that the Games are having now—providing skills, training, apprenticeships and jobs for individuals and contracts to UK businesses—and how they are helping to prepare the new, post-downturn economy.

This is the first quarterly report produced by the Government Olympic Executive. It marks a shift from a six-monthly to a quarterly reporting cycle, which will increase further the transparency of the project.

I would like to commend this report to the Members of both Houses and thank them for their continued interest and support of the London 2012 Games.

Copies of the quarterly economic report May 2009 are available at www.culture.gov.uk and will be deposited in the Libraries of both Houses.