The Times finds £1 billion Olympic black hole

Today's Times newspaper headlines that Britain faces a £1 billion black hole after the 2012 Olympics because of “ludicrous” property price projections backed by ministers.

The newspaper says that today the Conservatives and Liberal Democrats will, for the first time, vote against government plans to give the Olympics more money. A report for the London Development Agency (LDA) suggests that the government’s estimates for the amount it will recoup in land sales after the Olympic Games are unrealistic.

Ken Livingstone, the Mayor of London, and Tessa Jowell, the Olympics Minister, signed a memorandum of understanding last year stating that at least £1.8 billion would be raised in land sales after the games. The LDA now fears that this figure, based on a 16% per annum increase in land prices in Stratford, East London, over the next 15 to 20 years, is too optmistic. It told the London Assembly last week that it now plans to raise £800 million, leaving a £1 billion shortfall. About £675 million of this had been due to go to the National Lottery to repay money lent to the Games. This money could now be lost.

Apparently Jowell and the others implicated thought that land prices would increase at 16% in the future because they had increased even faster in the past.